Written Commentary
STOCK INDEX FUTURES
Stock index futures were lower in the overnight trade as earning season kicks off.
However, prices advanced when the December producer price index report was released.
The producer price index for December unexpectedly declined 0.1% when up 0.2% was expected. On an annualized basis the producer price index was up 1.0% when a gain of 1.3% was anticipated.
The fundamentals and technicals remain supportive to stock index futures longer term despite recent talk of a potentially less dovish Federal Reserve this year.
INTEREST RATE MARKET FUTURES
Futures firmed when the December producer price index report was released.
Neel Kashkari of the Federal Reserve will speak at 9:00 central time.
Financial futures markets are predicting there is a 5.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points and the January 31 policy meeting, and there is a 95.0% probability that the Fed will keep rates unchanged.
CURRENCY FUTURES
The U.S. dollar index advanced due to flight to quality buying in light of escalating Middle East tensions. However, almost all of the overnight gains were given back when the bearish U.S. producer price index report was released.
Lower prices are likely for the U.S. dollar longer term.
The U.K. economy expanded by 0.3% in November after contracting by 0.3% in October. Economists forecast the U.K. economy would expand by 0.2% in November.
A gauge for Japan’s service sector confidence improved by 1.2 points from the previous month to 50.7 in December 2023, beating market predictions of 49.9. This was the highest level since August and the first increase in four months.
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