Record Highs for S&P 500 & NASDAQ Futures

STOCK INDEX FUTURES

December S&P 500 and December NASDAQ futures advanced to new records highs today.

Futures are higher despite yesterday’s geopolitical events in France and South Korea.

The November ADP employment report showed an increase of 146,000 when up 165,000 were expected.

The 8:45 central time November PMI composite final is anticipated to be 55.3.

There are two 9:00 reports. October factory orders are forecast to be up 0.4%, and the November ISM services index is estimated to be 55.5.

Federal Reserve Chair Jerome Powell will speak at 12:45.

Also, at 1:00 the Federal Reserve will release its Beige Book on the economy. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.

The long term fundamentals and technicals remain supportive to stock index futures.

CURRENCIES

The U.S. dollar index advanced in the overnight trade although some of these gains were given back when the weaker than expected ADP employment report was released.

Recent gains in the greenback were linked to ideas that the U.S. economy will hold up well compared to a deteriorating economic outlook in other parts of the world.

Business activity across the euro zone declined sharply last month. HCOB’s final composite Purchasing Managers’ Index for the currency union fell to 48.3 in November from October’s 50.0.

This was slightly ahead of a 48.1 preliminary estimate but still well below the 50 mark, which separates growth from contraction.

Bank of England Governor Andrew Bailey indicated the U.K. could be on track for four interest rate cuts in 2025, if inflation continues on a downward path. Markets are currently pricing in a hold on interest rates at the Bank of England’s December 19 meeting.

The fundamentals and technicals remain supportive to the U.S. dollar, and higher prices are likely. The fundamentals and technicals remain bearish for the euro currency and the British pound, and lower prices are likely.

It is widely anticipated that the Bank of Canada will reduce its key interest rate by 25 basis points at its December 11 policy meeting.

The Australian gross domestic product increased 0.3% on a quarter-to-quarter basis in the third quarter of 2024. This was the 12^th  consecutive period of quarterly growth but fell short of market expectations of a 0.4% increase.

INTEREST RATES

Futures are steady at the front end of the yield curve and are lower at the long end of the curve.

There was only a limited bullish reaction to the weaker than expected ADP employment report.

There is a 69% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its December 18 policy meeting, and there is a 31% chance of the FOMC keeping rates unchanged at 4.50% – 4.75%.

It is likely that the FOMC will be slower to add accommodation in 2025 than the consensus view.

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