Dallas Fed Manufacturing Index Rebounds From Multi-Year Lows

Key Insights

• Dallas Fed Manufacturing Index increased from -29.1 in May to -23.2 in June. 
• New orders index remained unchanged at -16.6.
• SP500 tested session lows as traders remained worried about hawkish Fed. 

On June 26, the Dallas Fed released the Dallas Fed Manufacturing Index report for June. The report indicated that Dallas Fed Manufacturing Index improved from -29.1 in May to -23.2 in June, compared to analyst consensus of -26.5.

According to the report, the production index fell three points to -4.2, indicating a slight contraction in output. The new orders index was unchanged at -16.6, while the growth rate of orders index declined to -23.7, which was its lowest value since mid-2020.

Overall, the report showed that the manufacturing sector remained under pressure, which was in line with the recent data.

The FedWatch Tool indicates that there is a 74.4% probability of a 25 bps rate hike at the next Fed meeting in July. Traders expect that Fed will raise rates despite problems in the manufacturing sector. After the potential July hike, the federal funds rate is expected to stay at 525 – 550 bps until the end of the year.

SP500 pulled back below the 4350 level after the release of the report. While Dallas Fed Manufacturing Index exceeded analyst expectations, traders are worried that Fed’s rate hikes will put too much pressure on the economy.

U.S. Dollar Index continues to rebound from session lows as traders bet on hawkish Fed. Currently, the U.S. Dollar Index is trying to settle above the 102.80 level.

Gold pulled back towards the $1925 level as traders focused on the rebound of the American currency. The report did not have a material impact on gold market dynamics.

For a look at all of today’s economic events, check out out economic calendar.