As we approach the final trading day of May, U.S. stock futures are suggesting a negative start at the opening bell. In overnight trading, markets in Asia lost ground. Meanwhile, the major European indexes are in the red. Elsewhere, oil prices are also headed lower, with West Texas Intermediate (WTI) down about 3.2%, to around $67.20 a barrel. Across the board, the declines were triggered by weaker-than-expected reports on factory and services activity in China for the month of May.
Stocks began the holiday shortened week with little movement, as investors await progress on the debt ceiling deal. Following the agreement reached by President Joe Biden and House Speaker Kevin McCarthy, the bill will now be voted upon by the House, after which it would then move on to the Senate. The accord reached over the weekend was an important step, but investors will now be focused on whether it can be wrapped up by June 5th, which is the latest date Treasury Secretary Janet Yellen estimates the U.S. could face default. If passed, the debt limit will be suspended until January of 2025.
As far as other economic news, the docket is relatively light this week. However, there are some key reports coming up, including the Institute for Supply Management’s manufacturing index for May, which comes on Thursday morning. Consensus estimates are calling for a relatively flat reading of around 47%, versus the 47.1% recorded in April. (Percentages above 50 indicate expansion, while those below 50 suggest contraction.) If the Street is correct, it would mark the seventh-consecutive month of decline and the second-lowest figure in the past year. Meanwhile, Friday brings the U.S. employment report for May, where estimates call for 188,000 jobs to be added to payrolls, down from 253,000 in April, and the May unemployment rate, where market watchers are looking for a slight uptick to 3.5%, compared to 3.4% in April. Should these three reports come in as expected, it would provide further evidence that the Federal Reserve’s interest-rate increases are gaining traction. As it stands, Fed Fund futures prices are indicating a greater than 60% probability of another quarter-percent rate hike at the central bank’s next meeting in two weeks.
Stocks closed out Tuesday’s muted session in mixed fashion, with the Dow Jones Industrials down 50 points (0.2%), while the broader S&P 500 moved ahead by a fraction of a point and the tech-heavy NASDAQ tacked on 41 points (0.3%).
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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