Written Commentary
STOCK INDEX FUTURES
S&P 500 and Dow futures advanced to record highs on Friday despite news that the University of Michigan’s consumer sentiment index for the U.S. slumped to 70.2 in August, which is the lowest level since 2011 and one of the six sharpest declines in the past 50 years of the survey. The August consumer sentiment index was expected to be 81.4.
Stock index futures are lower today, pulling back from record levels as geopolitical and growth concerns weighed on risk appetite.
The August Empire State manufacturing index was 18.3 when 30.0 was anticipated.
Despite lower prices today the fundamentals and technical aspects remain positive for stock index futures.
CURRENCY FUTURES
The U.S. dollar index is higher due to a flight to quality flow of funds.
Federal Reserve Chairman Jerome Powell will hold a townhall discussion on Tuesday and the Federal Open Market Committee’s minutes from its recent policy meeting will be released on Wednesday, which could provide more clarity on the Fed’s moves.
The Japanese yen is higher on news that Japan’s economy grew slightly in the second quarter of 2021. The world’s third-largest economy in the April-June quarter expanded 0.3%, which compares to the market consensus of 0.2% growth and after a downwardly revised 0.9% expansion in the first quarter.
INTEREST RATE MARKET FUTURES
There were sharp gains for the 30-year Treasury bond futures on Friday when the very weak University of Michigan consumer sentiment index was reported.
There were additional gains today when the disappointing August Empire State manufacturing index was released.
In addition, flight to quality buying is supporting futures due to increasing geopolitical risks.
The interest rate futures markets have been indicating since May clues about the state of the global economy and inflation with the U.S. Treasury yield curve flattening. A flattening yield curve suggests a slower rate of global economic growth in the future.
There are growing expectations, fueled by some hawkish Fed comments recently that the Fed may use the August 26-28 Jackson Hole Economic Policy Symposium to announce a tapering of its asset-purchase program.
However, some traders are questioning why the 30-year Treasury bond futures are substantially off of their May lows if there is an imminent tapering of the Fed’s asset-purchase program.
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