Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed and were able to recover from the overnight selling pressure.
Yesterday’s consumer credit report showed an increase of $6.84 billion in January of 2022, which is the least since January of 2021, easing from an upwardly revised $23.38 billion gain in the previous month, and well under market expectations of a $21.5 billion increase.
The National Federation of Independent Business small business optimism index for February declined for a second consecutive month to 95.7 when 97.1 was anticipated. The index fell to the lowest since January of 2021.
The 8:45 central time January wholesale inventories report is estimated to show a 0.8% increase.
The dominant influences remain geopolitical tensions followed distantly by the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index yesterday advanced to its highest level since May 2020, as investors continue a move to safety. However, the greenback is a little lower today.
Yesterday the euro currency weakened to its lowest level since May 2020. There was some recovery today on news that the European Union will consider jointly issuing bonds to finance energy spending and other projects. The EU is expected to reveal a plan later this week for the joint spending after leaders hold an emergency summit in Versailles.
INTEREST RATE MARKET FUTURES
The benchmark 10-year Treasury yield rose to as high as 1.86% today, which is a sharp move from its weekly lows of 1.67%, as investors anticipate a policy tightening cycle.
The Treasury will auction three-year notes today.
Financial futures markets are predicting there is a 95.9% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points and a 4.1% probability that the Fed will leave its fed funds rate unchanged at 0 to 25 basis points at its March 16 policy meeting. A few weeks ago the probability of a 50 basis point rate hike was over 50.0%.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also globally, it will be difficult for the Federal Reserve and other major central banks to maintain ramped-up hawkish policies.
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