S&P 500; US Indexes Fundamental Daily Forecast – Bearish Reaction to Manchester Attack

The three major U.S. stock indexes closed higher on Monday as President Trump stuck to the script on his visit to Saudi Arabia and Israel. Investors are also realizing that they can’t do much about the turmoil in Washington until they hear from former FBI Director James Comey sometime next week and since the appointment of a special prosecutor to find out if the Trump Campaign conspired with the Russians to rig the presidential election.

Sure there are still going to be headlines about Trump’s alleged involvement in the rigging of the election and the possibility that he obstructed justice when he abruptly fired Comey, but stock investors appear to be taking the situation in stride, leading others to speculate in the gold and Japanese Yen markets if they feel the need for protection.

In the cash market, the blue chip Dow Jones Industrial Average finished the session at 20894.83, up 89.99, or +0.43%. The bench mark S&P 500 Index closed at 2394.02, up 12.29, or +0.52% and the tech-based NASDAQ Composite settled at 6133.16, up 49.46 or +0.81%.

Trump visited Israel and Palestine on Monday. One-day earlier he visited Saudi Arabia, where he inked a multi-billion-dollar arms deal. Defense-related stocks popped on the back of the deal, with the iShares U.S.-Aerospace & Defense ETF (ITA) rising about 0.9 percent.

The news of the arms deal seemed to be the only item causing any reaction from investors. Traders had no reaction to another successful ballistics test by North Korea over the week-end, and former FBI Director James Comey’s testimony before the Senate Intelligence Committee after Memorial Day.

There were no major U.S. economic reports released Monday with many traders looking ahead to the release of the minutes from the Federal Reserve’s meeting on May 3. The minutes are scheduled for release on Wednesday.

Several Fed members gave speeches on Monday with none giving any hints that they were concerned about the impact from U.S. political turmoil.

Forecast

Stock traders are likely gearing up for Wednesday’s Fed meeting minutes. Therefore, volume may be low as well as volatility on Tuesday.

Early in the session on Tuesday, investors will get the opportunity to react to U.S. Flash Manufacturing PMI, Flash Services PMI, New Home Sales and the Richmond Manufacturing Index.

Several Fed members are also scheduled to speak.

Weaker economic data is not likely to prevent the Fed from raising rates in June, but it is likely to reduce the odds of numerous future Fed rate hikes. Investors will also be listening to the Fed speakers for clues as to the timing and number of future rate hikes.

There’s not much to do about the situation in Washington because former FBI Director James Comey is not scheduled to testify before the Senate Intelligence Committee until next week and the special prosecutor’s report won’t be released for months. Any breaking stories will be highly speculative.

Buying could dry up as the June E-mini S&P 500 approaches its contract high at 2404.50, and the Dow and NASDAQ near their major highs.

Also we could see a reaction to the deadly bombing in Manchester as more information is revealed about the attack.