Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower but remain above major downtrend lines.
Today is the first day of the two-day Federal Open Market Committee meeting. A statement will be released tomorrow at 1:00 central time followed by a Federal Reserve Chair Powell press conference at 1:30.
Housing starts in February were 1.501 million when 1.383 million were expected, and permits were 1.456 million, which compares to the anticipated 1.450 million.
Import prices in February increased 0.4% when a decline of 0.1% was estimated, and export prices were up to 0.1%, which compares to the forecast decline of 0.2%.
The 8:15 February industrial production report is forecast to show a 0.2% increase, and capacity utilization in February is estimated to be 77.8%.
Several downside blow-off indicators took place last week, indicating lows for the move may be close.
In the longer term, a more accommodative Federal Open Market Committee will support futures.
INTEREST RATE MARKET FUTURES
The yield on the 10-year U.S. Treasury note remained stable around 4.31% on Tuesday.
There are no Federal Reserve speakers this week since the pre-FOMC ‘blackout’ period just started. The blackout period begins on the second Saturday before a Federal Open Market Committee meeting and ends on the Thursday following the meeting. The next FOMC policy meeting is scheduled for March 19.
Three weeks ago there was a major change in the fundamentals and outlook for Federal Reserve policies. The probabilities are increasing that the central bank will more aggressively ease credit conditions this year.
Financial futures markets are predicting the FOMC will keep its fed funds rate unchanged at its March and May meetings but will lower its key interest rate two more times this year with the first reduction at its June policy meeting.
An accommodative FOMC will underpin prices.
CURRENCY FUTURES
The U.S. dollar index is higher but is close to recent five-month lows. Economic uncertainties and trade tensions have recently weighed on the currency.
The ZEW Indicator of Economic Sentiment for Germany jumped to 51.6 in March 2025, which is the highest level since February 2022, and compares to 26 in the previous month and estimates of 48.1. The assessment of the current economic situation improve slightly to -87.6 from -88.5.
The British pound is a little lower today but recently advanced to the highest in over four months, due to expectations that U.K. interest rates will stay higher for longer. The Bank of England is likely to hold rates at 4.5% this week, with traders pricing in a slower pace of interest rate cuts compared to the Federal Reserve.
The Bank of Japan will hold its monetary policy committee meeting tomorrow. The central bank is widely expected to hold interest rates steady at 0.5%.
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