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Influence of Higher U.S. Interest Rates Dominates

by Archer Financial Services | May 15, 2018

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures are lower as prospects for higher interest rates from the Federal Reserve increase. 

New York manufacturers reported that business activity continued to improve in May.

The Empire State manufacturing survey's general business conditions index, compiled by the Federal Reserve Bank of New York, improved to 20.1 in May from 15.8 in the previous month. Economists were predicting a reading of 15.

The prices paid portion of the report rose to its highest level since 2011, growing to 54 in May from 47.4 in April and the prices received index was higher at 23 from 20.7 in May .

The new orders index advanced to 16 from 9, and delivery times continued to lengthen.

The Commerce Department said retail sales in April increased a seasonally adjusted .3% in April from the previous month, as expected.  

The 9:00 central time March business inventories report is expected to be up .2% and the 9:00 May housing market index is anticipated to be 69.

A second round of high level trade negotiations between the U.S. and China takes place in Washington today through Saturday.

In the longer term, traders will probably gradually shift their focus of attention more toward corporate earnings and the still overall accommodative global interest rate policies and away from a variety of geopolitical worries, including global trade tensions and now the situation between the U.S. and Iran.

 

CURRENCY FUTURES

The U.S. dollar advanced after the stronger than estimated May Empire State manufacturing survey was released.

The British pound is lower in spite of news that wage growth in the U.K. outpaced inflation for the first time in a year and even though the U.K. economy added almost 200,000 jobs.

The Canadian dollar and the Australian dollar are lower due to interest rate differential expectations, ignoring the bullish influence of the increase in crude oil prices.

 

INTEREST RATE MARKET FUTURES

Futures declined when the stronger than estimated May Empire State Manufacturing Survey was released.

At 12:10 San Francisco Federal Reserve Bank President John Williams will speak at the Economic Club of Minnesota in Minneapolis.

The Federal Reserve is forecasting another two rate hikes this year, although an increasing number of policymakers see three more as a possibility.

The probability of a fed funds rate increase from the FOMC at the June 13 meeting is almost 100%, which is unchanged from yesterday.  

While a June interest rate hike from the Federal Reserve appears to be almost fully priced in, the probability of an additional rate hike in December stands at 93%, which compares to 91% yesterday.

 

SUPPORT AND RESISTANCE

 

June 18   S&P 500

Support    2706.00       Resistance    2734.00

 

June 18   U.S. Dollar Index

Support    92.430         Resistance    93.210

 

June 18   Euro Currency

Support    1.18430       Resistance    1.19720

 

June 18   Japanese Yen

Support    .90770         Resistance    .91450

 

June 18   Canadian Dollar

Support    .77330         Resistance    .78320

 

June 18   Australian Dollar

Support    .7447           Resistance    .7544

 

June 18   Thirty Year Treasury Bonds

Support    141^12        Resistance    142^26

 

June 18   Gold

Support    1291.0         Resistance    1316.0

 

July 18   Copper

Support    3.0400         Resistance    3.1050

 

June 18   Crude Oil

Support    70.55           Resistance    72.21


For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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