Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures reversed early losses to trade higher as investors focus on earnings season.
Traders will watch to see if earnings will continue to surpass analysts’ expectations, providing a further catalyst to push prices higher.
The International Monetary Fund projected global output will grow 5.5% this year, which is up from the IMF’s October forecast of a 5.2% increase.
The 9:00 central time January consumer confidence report is expected to be 88.5.
The 9:00 January Richmond Federal Reserve manufacturing index is anticipated to be 11.5.
The two-day Federal Open Market Committee’s monetary policy meeting kicks-off today.
Overall, futures are performing well for the news, which suggests higher prices.
CURRENCY FUTURES
The U.S. dollar is lower, and the euro currency is higher.
Interest rate differential expectations suggest lower prices for the U.S. dollar and higher prices for the euro currency longer term.
The British pound is higher on mixed news. Average weekly earnings in the U.K. increased 3.6% from a year earlier, which is the biggest increase since September of 2019 and well above market forecasts of a 2.9% increase.
The unemployment rate in the U.K. edged up to 5% in the three months to November 2020 from 4.9% in the previous period and was slightly below forecasts of 5.1%. It remains the highest jobless rate since mid-2016.
The Confederation of British Industry’s trades survey showed an index of retail sales fell sharply to -50 in January of 2021 from -3 in December, which is much worse than the market forecast of -28.
INTEREST RATE MARKET FUTURES
The Treasury will auction five-year notes.
The Fed will conclude its 2-day monetary policy meeting on Wednesday and is expected to reinforce its commitment to a very accommodative monetary policy and to clarify it will not be tapering its asset purchase program anytime soon.
In light of a likely unchanged fed funds target rate from the Fed at its January 27 policy meeting and its pledge not to hike its fed funds rate until possibly 2023, futures at the short end of the curve are likely to hold steady.
The fundamentals for the 30-year Treasury bond futures on balance turned bearish last August. However, as of about two weeks ago the fundamentals at the long end of the curve have changed and are now mixed.
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