Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher.
Mortgage applications declined 1.2% in the week ending August 19, following a 2.3% fall in the previous week, as refinance applications fell 2.8% and those to purchase a home were down 0.5%.
Durable goods orders in July were unchanged when an increase of 0.5% was expected.
The 9:00 central time July pending home sales report is anticipated to be down 2.5%.
Stock index futures are likely to have a hard time advancing this week ahead of the Federal Reserve’s annual Jackson Hole, Wyoming economic symposium on August 25-27. Federal Reserve Chairman Jerome Powell will likely stress that tightening has a long way to go when he speaks on Friday morning.
CURRENCY FUTURES
The U.S. dollar advanced to new highs for the move yesterday, but declined from those highs when all three major U.S. economic report came in weaker than predicted.
The greenback is higher today, and over the next few days it is likely to challenge yesterday’s high.
Higher prices are likely for the U.S. dollar this week in advance of Fed Chair Powell’s likely hawkish comments at Jackson Hole on Friday.
The euro currency remains under the $1.00 level as recession fears in Europe reemerged.
INTEREST RATE MARKET FUTURES
Federal Reserve Bank of Minneapolis President Neel Kashkari yesterday said the U.S. central bank needs to press forward with tighter monetary policy until it is clear that very high levels of inflation are moving back down. “When inflation is 8.0% or 9.0% we run the risk of un-anchoring inflation expectations,” Mr. Kashkari said, and if that happened the Fed would likely have to embark on very aggressive rate increases to restore balance.
The Treasury will auction 5-year notes.
According to financial futures markets, there is a 45.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 54.5% probability that the rate will increase by 75 basis points at the September 21 policy meeting.
The inverted Treasury yield curve continues to flash warnings of economic risks ahead.
Futures will have a hard time rallying this week ahead of the Federal Reserve’s Jackson Hole economic symposium.
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