Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower as it appears that the Federal Reserve will be slow to pivot to accommodation.
The March Automated Data Processing, Inc. employment report showed an increase of 184,000 when up 150,000 was expected.
The 8:45 central time March PMI composite is anticipated to be 52.2.
The 9:00 March Institute for Supply Management services index is estimated to be 52.7.
Federal Reserve Chairman Powell will speak at 11:10 at the Stanford Business, Government and Society Forum.
The fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is lower.
Euro area inflation slowed more than expected, enhancing prospects for an interest rate cut by the European Central Bank in June.
The euro zone’s annual rate of inflation fell for the third straight month in March. Consumer increased 2.4% when up 2.6% was forecast.
The unemployment rate in the euro area was a record low of 6.5% in February 2024, matching January’s revised figure and compared with market forecasts of 6.4%.
The Swiss franc declined to its weakest level in five months. The Swiss National Bank lowered its benchmark interest rate by 25 basis points to 1.5% at its March meeting, surprising markets that expected no change.
INTEREST RATE MARKET FUTURES
Futures are lower as it is appearing more likely that the Federal Reserve will be slow to pivot to accommodation this year.
There was pressure on futures when the stronger than expected Automated Data Processing, Inc. employment report was released.
Loretta Mester and Mary Daly of the Federal Reserve spoke on Tuesday. Mester and Daly both indicated three rate cuts from the Federal Reserve are likely this year.
In addition to Fed Chair Powell, other Fed speakers today are Michelle Bowman at 8:45, Austan Goolsbee at 11:00, Michael Barr at 12:10 and Adriana Kugler at 3:30.
Financial futures markets are predicting there is a 2.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the May 1 policy meeting, and there is a 98.0% chance that the Fed will keep rates unchanged. June 12 62%
The consensus view currently is that the FOMC will lower its fed funds rate three times this year starting in June.
My view is that only two cuts are likely in 2024.
The fundamentals and technicals for futures are bearish on balance.
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