Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher due to slightly lessened tensions in the Mideast and the on- balance better than expected corporate earnings.
Retail sales in March increased 0.7% when up 0.4% was expected.
The April Empire State manufacturing index was -14.3 when -5.1 was anticipated.
The 9:00 central time April housing market index is forecast to be 51.
The longer term fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index was lower in the overnight trade but firmed when the retail sales report was released.
The greenback has been supported by interest rate differentials that have turned more favorable.
Industrial production in the euro area rebounded by 0.8% month-over-month in February 2024, marking a partial recovery from a revised 3.0% decline in January and aligning with market estimates.
European Central Bank policymaker Peter Kazimir said the ECB can cut rates in June given the persistent decline in inflation. In addition, he said the ECB is not committing to any policy path beyond June.
Major central bank policies are diverging. The Federal Reserve is likely to remain restrictive for longer, while other major central banks will probably become accommodative sooner.
The Japanese yen fell to new lows for the move today. Japan’s finance minister Suzuki said he is watching foreign exchange moves closely.
INTEREST RATE MARKET FUTURES
Flight to safety longs are being liquidated today in light of a perceived slight lessening of tensions in the Mideast. There was additional pressure on futures when the stronger than estimated retail sales report was released.
Mary Daly of the Federal Reserve will speak at 7:00 PM.
Financial futures markets are predicting no change in the fed funds rate at the Federal Open Market Committee’s May 1, June 12 and July 31 meetings. However, there is a 70% probability of a rate reduction at the September 18 meeting.
Prices are lower across the board with futures at the long end of the curve making new lows.
The fundamentals and technicals for futures remain bearish on balance.
Lower prices for futures are likely.
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