Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher, as investors look ahead to earnings season kicking into higher gear. More than a third of S&P 500 companies will report earnings this week.
Also, traders are awaiting the Federal Reserve’s policy meeting later this week.
The June Chicago Federal Reserve national activity index was negative 0.19 when 0.05 was expected.
The 9:30 central time July Dallas Federal Reserve manufacturing index is anticipated to be negative 12.0.
Futures are being supported by the belief that the Federal Open Market Committee is becoming less hawkish.
In addition, the technical aspects are becoming more friendly.
CURRENCY FUTURES
The euro currency is higher despite news that business confidence in Germany worsened sharply in July. The Ifo business-climate index declined to 88.6 points in July from a revised figure of 92.2 in June, data from the Ifo Institute showed Monday. This is the lowest level since June 2020. Economists expected the index to come in at 90.5.
The index of the current situation declined to 97.7 in July from 99.4 in June, while the gauge assessing companies’ expectations fell to 80.3 from 85.5.
The Ifo index is based on a poll of approximately 9,000 companies in manufacturing, services, trade and construction.
Longer term, lower prices are likely for the euro currency.
The British pound advanced on news that the Confederation of British Industry’s quarterly gauge of manufacturing optimism in the U.K. increased to -21.0 in the third quarter of 2022 from -34.0 in the previous three-month period but remained in negative territory for the third consecutive quarter.
INTEREST RATE MARKET FUTURES
Futures are lower today in response to higher stock index futures.
Last week the 30-year Treasury bond futures broke out above a two-week symmetrical triangle pattern.
The Treasury will auction two-year notes today.
According to financial futures markets, there is a 77.5% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 22.5% probability that the rate will increase by 100 basis points at the July 27 meeting.
Higher prices are likely for the interest rate market futures on the growing belief that the Federal Open Market Committee is becoming less hawkish.
In addition, there is speculation that the Federal Open Market Committee will return to accommodation next year.
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