Stock Indexes Likely to Partially Recover

by Alan Bush

STOCK INDEX FUTURES

Stock index futures traded lower due to increased U.S.-China trade tensions.

April retail sales fell 16.4%, which compares to the expected decline of 11.2%.

The May Empire State manufacturing survey was negative 48.5 when negative 65.0 was anticipated.

April industrial production declined 11.2% when down 11.5% was predicted and capacity utilization was 64.9% when 64.1% was estimated.

There are three 9:00 central time reports. The May consumer sentiment index is expected to be 66. The March business inventories report is anticipated to show a decline of 0.5% and the March Job Openings and Labor Turnover Survey (JOLTS) is predicted to be 5.9 million.

Some recovery is likely for stock index futures from the current lower levels.

CURRENCY FUTURES

The euro currency is higher after a report showed Germany’s gross domestic product in the first quarter contracted 2.2% compared with the previous quarter but was better than economist’s predictions of a 2.5% decline.

The euro zone’s trade with the rest of the world fell in March, with imports falling at the fastest rate since records began in 2009.   The European Union’s statistics agency said that, adjusted for seasonal variations, the currency area’s purchases of goods from beyond its borders fell 9.0% from February, while its exports declined 8.9%.

The British pound fell when a lead U.K. negotiator said little progress is being made in Brexit talks.

INTEREST RATE MARKET FUTURES

Some flight to quality buying is coming into the long end of the curve in light of lower stock index futures.

The yield on 10-year Treasuries fell to 0.601%, which is the lowest point this month, from 0.617% on Thursday as investors sought safe-haven assets.

The Federal Reserve’s balance sheet grew to a record $6.98 trillion in the week ended May 13, which is up from $6.72 trillion in the previous week, the central bank said yesterday. Much of the balance sheet’s expansion was due to an increase in the Fed’s holdings of mortgage-backed bonds by $178 billion.

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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 information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  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.