Written Commentary
STOCK INDEX FUTURES
Stock index futures declined when the employment data was released at 7:30 central time.
The stronger than predicted employment report is short-term bearish because it could influence the Federal Reserve to become more hawkish.
Nonfarm payrolls in November were up 263,000 when an increase of 200,000 was expected and the unemployment rate was 3.7%, as anticipated.
The labor participation rate was 62.1% when 62.3% was predicted.
Hourly earnings were up 0.6% when up 0.3% was estimated.
The average workweek was 34.4 hours when 34.5 hours were expected.
Despite lower prices today the fundamentals and technicals for stock index futures remain supportive.
At least a partial recovery is likely this afternoon.
CURRENCY FUTURES
Yesterday the U.S. dollar index fell to its lowest level since August 11. However, the greenback is higher today in response to the on-balance better than expected employment numbers.
Despite higher prices today, interest rate differential expectations long-term bearish for the greenback.
Lower prices are likely this afternoon for the U.S. dollar from the current higher prices.
The euro currency is higher in spite of news that producer price inflation in the euro area slowed sharply to 30.8% year-on-year in October 2022, which is down from September’s 41.9% and August’s record high of 43.4%, and coming in below market expectations of 31.5%.
Bank of Japan Governor Kuroda said inflation rates around the world are expected to slow gradually.
INTEREST RATE MARKET FUTURES
Futures came under pressure when the employment report was released.
According to financial futures markets currently, there is a 70.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 policy meeting and a 30.0% probability that the rate will be hiked by 75 basis points.
The fundamental and technical aspects have turned more supportive for futures.
At least a partial recovery is likely this afternoon.
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