Aug Small Business Optimism Index Falls to Three-Month Low

STOCK INDEX FUTURES

Stock index futures are higher.

The National Federation of Independent Business small business optimism index for August was 91.2,  the lowest in three months, when 93.6 was expected. NFIB Chief Economist Bill Dunkelberg said, “Historically high inflation remains the top issue for owners as sales expectations plummet and cost pressures increase. Uncertainty among small business owners continues to rise as expectations for future business conditions worsen.”

Investors are awaiting two key inflation reports that could influence Federal Reserve policy. The August consumer price index report will be released on Wednesday and is expected to show a 0.2% increase, and the August producer price index report will be released on Thursday and is forecast to show a 0.2% gain.

Futures have performed much better than the news would suggest again today, which indicates traders are looking beyond recent economic reports to some other not yet obvious bullish fundamental.

Follow-through gains are likely for stock index futures in today’s trade.

CURRENCY FUTURES

The U.S. dollar index is higher and follow-through gains are likely in today’s trade.

The European Central Bank will hold a policy meeting on Thursday, and a 25 basis point interest rate cut is widely anticipated.

Regular pay in the U.K., which excludes bonuses, increased 5.1% on a year-to-year basis in the three months to July, which was in line with the analysts’ forecasts. This was the smallest increase since at least June 2022.

INTEREST RATE MARKET FUTURES

Futures are higher and are holding up very well even though it appears that the Federal Reserve is less likely to lower its fed funds rate by 50 basis points at its upcoming policy meeting.

The U.S. Treasury will auction three-year notes today.

Currently there is a 73% probability that the Federal Open Market Committee will lower its funds rate by 25 basis points at its September 18 meeting, and there is a 27% probability that the FOMC will reduce its key interest rate by 50 basis points in September.

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