Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower after hawkish comments from Federal Reserve officials.
Fed Chair Power’s comments this morning were hawkish on balance as expected.
The National Federation of Independent Business small business optimism index for December declined to a six-month low of 89.8 from 91.9 in November when 91.3 was expected.
The 9:00 November wholesale inventories report is anticipated to show a 1.0% increase.
CURRENCY FUTURES
The U.S. dollar index is higher due to hawkish comments from Federal Reserve officials.
San Francisco Federal Reserve president Mary Daly said she expects interest rates to increase beyond 5.0% in 2023. Raphael Bostic of the Atlanta Federal Reserve said policymakers should hike above 5.0% by early in the second quarter and hold rates there for a long time.
Interest rate differential expectations, which have been bearish for the U.S. dollar since late September 2022, are now just neutral.
The British pound is lower on news that Britain’s labor market cooled further in December.
INTEREST RATE MARKET FUTURES
Futures are lower after hawkish comments from Federal Reserve officials.
The Treasury will auction three-year notes today.
There are more indications that inflation is coming down around the world. In addition to inflation numbers in the euro zone recently reported to have softened, today it was reported that the annual inflation rate in Brazil eased to 5.79% in December of 2022 from 5.90% in the prior month.
Also, Norway’s annual inflation rate eased to 5.9% in December 2022, which is below market expectations of 6.1% and from 6.5% in the previous month.
One exception is inflation in Japan, which came in a little higher than estimated today.
According to financial futures markets currently, there is a 76.0% probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points at the February 1 policy meeting and a 24.0% probability that the rate will be hiked by 50 basis points.
Futures are likely to recover today from the lower morning prices.
Longer term, higher prices are likely for futures across the yield curve.
Interested in more futures markets? Explore our Market Dashboards here.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
