Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher even though it appears that the Federal Reserve will be slow to pivot to accommodation this year.
Challenger, Gray & Christmas, Inc. reported there were 90,309 job reductions in March, which compares to the 84,638 cuts in February.
Jobless claims in the week ended March 30 were 221,000 when 213,000 were anticipated.
The fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is lower.
The minutes from the most recent European Central Bank policy meeting showed officials acknowledged that the case for considering interest rate cuts was gaining strength as inflation is forecast to continue its downward trend in the coming months.
Industrial producer prices in the euro area decreased by 1.0% from the previous month in February 2024, which compares to market expectations of a 0.7% decline. This was the largest decline in producer prices since May 2023.
The HCOB euro zone Composite PMI was revised upward to 50.3 in March, hitting the highest level in ten months, and is up from the initial estimate of 49.9.
INTEREST RATE MARKET FUTURES
Federal Reserve Chair Powell yesterday reiterated that the Fed does not expect that it will be appropriate to lower the policy rate until policymakers have greater confidence that inflation is moving sustainably lower toward 2.0%. Powell also said it will likely be appropriate to begin lowering the policy rate at some point this year.
Federal Reserve speakers today are Patrick Harker at 9:00, Thomas Barkin at 11:15, Austan Goolsbee at 11:45, Loretta Mester at 1:00, Neel Kashkari at 1:00, Kathleen O’Neill Paese at 4:00, Alberto Musalem at 6:30 and Adriana Kugler at 6:30.
Financial futures markets are predicting there is a 1.0% 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 99.0% chance that the Fed will keep rates unchanged.
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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