Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed.
Traders are cautious ahead of the Bank Stress Test results due this week.
Durable goods orders in May increased 1.7% when a decline of 1.0% was expected.
There are three 9:00 central time reports. The June consumer confidence index is anticipated to be 104.0. May new home sales are predicted to be 667,000, and the June Richmond Federal Reserve manufacturing index is estimated to be -10.0.
Federal Reserve Chair Powell will speak Wednesday morning at 8:30.
Expect a sideways trade in advance of Powell ‘s speech, which will likely be hawkish on balance, and higher prices after his speech is out of the way.
CURRENCY FUTURES
The U.S. dollar index is lower.
The euro currency is higher after European Central Bank President Lagarde said the central bank needs to bring interest rates into “sufficiently restrictive” territory to lock in policy tightening.
Lagarde reiterated that July will bring the ninth consecutive increase in borrowing costs to bring down inflation.
INTEREST RATE MARKET FUTURES
The Treasury will auction five-year notes.
Financial futures markets are predicting there is a 77% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points at the July 26 meeting, and there is a 23% chance that the fed funds rate will remain unchanged.
Federal Reserve officials are indicating there will be two more fed funds rate hikes this year. However, financial futures markets pricing suggests the FOMC can only increase rates one more time in 2023.
Most major central banks remain hawkish despite growing evidence of a slowing global economy.
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