Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed to higher in an atmosphere of uncertainty about the pace of Federal Reserve interest rate cuts and escalating geopolitical risks in the Middle East.
December S&P 500 futures were able to advance to new record highs today, and Dow futures were able to make a new record high in Friday.
Traders are awaiting the next batch of big bank earnings.
There are no major economic reports scheduled for today.
CURRENCY FUTURES
The U.S. dollar index advanced to its highest level since August 8. Much of the recent strength is linked to expectations that the Federal Reserve will not deliver further supersized interest rate cuts at its two remaining policy meetings this year.
Interest rate differentials remain supportive to the U.S. dollar and higher prices are likely.
The European Central Bank is expected to cut its deposit rate by 25 basis points on Thursday, following reductions in September and June.
The Swiss producer and import price index declined by 0.1% to 107.2 points in September compared to the previous month. The figure fell by 1.3% year-on-year. The producer price index was unchanged from August but was down by 0.2% compared to September 2023.
INTEREST RATE MARKET FUTURES
Futures are lower across the board with most of the pressure at the long end of the curve, especially the 30-year U.S. Treasury bond futures, on the belief that the Federal Open Market Committee will be relatively slow easing monetary conditions going forward.
Federal Reserve speakers today are Neel Kashkari at 8:00 central time, Christopher Waller at 2:00 PM and Neel Kashkari again at 4:00.
Currently there is an 84% probability that the FOMC will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is a 16% chance that the FOMC will keep its key interest rate unchanged at 4.75% – 5.00%.
Futures at the front end of the yield curve are likely to continue to gain on futures at the long end of the yield curve.
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