Influence of Higher U.S. Interest Rates Dominates

May 15, 2018

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 PresidentJohn Williamswill 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 1291.0Resistance 1316.0

July 18 Copper

Support 3.0400 Resistance 3.1050

June 18 Crude Oil

Support 70.55 Resistance 72.21

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