Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are higher after three days of heavy selling.
For this earnings season so far, 87.0% of the companies in the S&P 500 have reported results for the first quarter year-to-date as of Friday.
The dominant influences remain geopolitical tensions, the hawkish Federal Reserve and economic headwinds.
CURRENCY FUTURES
The U.S. dollar index advanced to a new 20-year high yesterday and is higher today as expectations of further Federal Reserve monetary tightening to combat inflation and fears of slowing global economic growth drove investors into the safety of the U.S. dollar.
Interest rate differential expectations suggest higher prices are likely for the greenback.
The ZEW Indicator of Economic Sentiment for Germany improved to -34.3 in May of 2022 from a two-year low of -41.0 in April. This beat market forecasts of -42.0, as the outlook is slightly less pessimistic for the economic situation in Germany. In contrast, the current conditions index declined further to -36.5, which is the lowest in a year and worse than forecasts of -35.0.
The Japanese yen fell to a new 20-year low yesterday but is a little higher today.
Interest rate differential expectations remain bearish for the Japanese yen and lower prices are likely.
INTEREST RATE MARKET FUTURES
Federal Reserve Bank of New York President John Williams said today that lowering inflation from current levels is the U.S. central bank’s main mission right now.
Other Federal Reserve speakers today are Raphael Bostic at 7:30, Thomas Barkin at 8:15, Neel Kashkari at 12:00, Loretta Mester at 2:00 and Raphael Bostic at 6:00 PM.
The Treasury will auction three-year notes today.
Financial futures markets are predicting there is an 85.7% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 14.3% probability that the rate will increase by 75 basis points at the June 15 policy meeting.
Longer term, lower prices are likely across the board for the interest rate market futures as most major central banks are anticipated to tighten credit policies this year.
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