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Stock Index Futures Higher on Mostly Bearish News

by Archer Financial Services | May 16, 2018

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures are higher in spite of recent increases in interest rates, and even though there are growing doubts about next month’s summit between President Donald Trump and Kim Jong Un.

Housing starts fell 3.7% in April from the prior month to a seasonally adjusted annual rate of 1.287 million. Economists had expected a 1.4% decline for starts.

Residential building permits dropped 1.8% to an annual rate of 1.352 million last month.   Economists had expected a .3% decline for permits in April.

April industrial production was up .7%, which compares to an anticipated gain of .6% and April capacity utilization was up .4% to 78%, when 78.4% was estimated.

The May Atlanta Fed Business inflation expectations report will be released at 9:00. The report in April showed 2.3%.  

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

Even though the yield on 10 year Treasury notes has surpassed the 3% level, there is room for interest rates to work higher before rising rates materially hurt broader economic conditions. 

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 and the euro currency fell due to reports that a possible future Italian government would seek to cancel 250 billion euros in Italian debt from European creditors.

The euro zone April consumer price index was up .3%, as expected.

The euro also fell sharply against the safe-haven Swiss franc.

The Japanese yen is higher even though a report showed Japan's economy contracted for the first time in nine quarters in January through March.

The Canadian dollar is higher on news that Canadian manufacturing sales increased at a faster pace than expected.  Factory sales rose 1.4% in March. The estimate was for manufacturing sales to rise .9%.  

The Canadian dollar and the Australian dollar are higher in spite of weaker crude oil prices.

 

INTEREST RATE MARKET FUTURES

Futures are mixed to higher in light of the weaker than expected housing starts and building permits numbers.  In addition, there is some flight to quality buying in light of the possibility that a future Italian coalition government could ask for debt forgiveness from its European creditors.

St. Louis Federal Reserve Bank President James Bullard will speak at 5:30 this afternoon.

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 92%, which compares to 93% yesterday.

 

SUPPORT AND RESISTANCE

 

June 18   S&P 500

Support    2702.00       Resistance    2719.00

 

June 18   U.S. Dollar Index

Support    93.000         Resistance    93.550

 

June 18   Euro Currency

Support    1.17800       Resistance    1.18960

 

June 18   Japanese Yen

Support    .90740         Resistance    .91170

 

June 18   Canadian Dollar

Support    .77650         Resistance    .78160

 

June 18   Australian Dollar

Support    .7437           Resistance    .7515

 

June 18   Thirty Year Treasury Bonds

Support    141^0          Resistance    141^24

 

June 18   Gold

Support    1283.0         Resistance    1301.0

 

July 18   Copper

Support    3.0400         Resistance    3.0800

 

June 18   Crude Oil

Support    70.55           Resistance    71.55


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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