Written Commentary
STOCK INDEX FUTURES
S&P 500 and NASDAQ futures hit new record highs yesterday. Prices are higher today and are closing in on historical highs.
Yesterday Federal Reserve Chair Jerome Powell delivered his semiannual testimony before the House Financial Services Committee.
Jerome Powell reiterated the central bank’s cautious approach on monetary policy. Powell said the Fed needs more evidence that inflation is moving sustainably toward its 2.0% target before lowering interest rates. However, he warned that maintaining a restrictive policy for too long could weaken economic activity and employment.
Fed Chair Powell will testify before the Senate Banking Committee today at 9:00 central time. His testimony today will be essentially the same as what he delivered to the House Financial Services Committee yesterday.
The 9:00 May wholesale inventories report is expected to show a 0.6% increase.
The longer term fundamentals remain supportive to stock index futures.
INTEREST RATE MARKET FUTURES
Futures are higher, especially at the long end of the yield curve.
In addition to Federal Reserve Chair Powell, other Federal Reserve speakers today are Austan Goolsbee and Michelle Bowman at 1:30, and Lisa Cook at 6:30 PM.
The U.S. Treasury will auction 10-year notes today.
Financial futures markets are suggesting there will be two 25 basis point rate cuts in 2024, despite many Federal Reserve officials predicting only one fed funds rate reduction this year.
Financial futures markets are predicting there is a 77% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
CURRENCY FUTURES
The U.S. dollar index is lower.
Traders believe the European Central Bank will lower key interest rates once or twice this year, after a recent report showed preliminary figures for the annual inflation rate in the euro area eased in June to 2.5%.
The Japanese yen depreciated to around 161.5 per U.S. dollar, which is close to the 38-year low made last week.
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