Written Commentary
STOCK INDEX FUTURES
Stock index futures are sharply higher in response to the substantially smaller than expected U.S. consumer price index, which puts pressure on the Federal Reserve to scale back its plans to hike interest rates.
The October U.S. consumer price index increased 0.4% in October when up 0.7% was anticipated. On an annualized basis the consumer price index increased 7.7% when 8.0% was predicted.
Jobless claims in the week ended November 5 were 225,000 when 221,000 were estimated.
The fundamentals for stock index futures are improving.
CURRENCY FUTURES
The U.S. dollar index was higher in the overnight trade but quickly declined when the smaller than predicted increase in the consumer price index was reported.
The greenback fell to its lowest level since September 13.
The U.S. dollar has underperformed in the last two months.
Other currencies against the U.S. dollar advanced as interest rate differential expectations continue to undermine the U.S. dollar.
INTEREST RATE MARKET FUTURES
Futures are higher across the board due to the smaller than expected increase in the consumer price index.
Federal Reserve speakers today are Patrick Harker at 8:00, Lorie Logan at 8:35, Esther George at 12:35 and John Williams at 5:35.
The Treasury will auction 30-year bonds today.
According to financial futures markets currently, there is an 81.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 meeting and a 19.0% probability that the rate will be hiked by 75 basis points.
Prior to the release of today’s consumer price index report there was a 52.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points and a 48.0% probability that the rate will be hiked by 75 basis points.
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