Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures advanced to record highs on the first trading day of November due to mostly stronger than expected corporate quarterly earnings reports and despite supply-chain problems and tight labor markets.
Approximately 82% of S&P 500 companies that have reported results so far this season have beaten expectations, according to FactSet data from early Friday afternoon.
The 8:45 central time October U.S. PMI manufacturing final is expected to be 59.2.
The 9:00 October Institute for Supply Management manufacturing index is anticipated to be 60.3 and the 9:00 September construction pending report is predicted to show an increase of 0.5%.
The longer-term fundamental and technical aspects remain supportive for stock index futures.
CURRENCY FUTURES
The U.S. dollar index is a little lower today but is still near three-week highs.
Higher prices are likely for the greenback in advance of the Wednesday FOMC policy meeting.
The Reserve Bank of Australia will hold a policy meeting on Tuesday. The RBA surprised investors when last week it declined to defend the 0.1% interest-rate target it had set for bond yields that mature in April 2024. The RBA’s move fueled expectations that it will eliminate the program, known as “yield curve control,” at this week’s meeting.
The Bank of England’s policy meeting is scheduled for Thursday. There is speculation that the Bank of England could be the first major central bank to nudge up interest rates after Governor Andrew Bailey warned on October 17 that the central bank “will have to act” if surging prices for goods and energy push up expectations of future inflation.
The Bank of Canada surprised markets last week when it ended its government-bond-purchase program and moved up the time frame for when it may first raise its benchmark interest rate from its current near-zero level.
INTEREST RATE MARKET FUTURES
There are no Federal Reserve speakers today due to the communications blackout period ahead of the November 3 FOMC policy meeting.
The Fed is widely expected to announce that it will start tapering its $120 billion monthly bond purchases on Wednesday. Economists expect the Fed will hold its fed funds rate unchanged at zero to 25 basis points. Traders are looking ahead to central bank guidance on the timing of U.S. interest rate hikes. Fed Chair Jerome Powell will hold a press conference after the meeting.
The next leg up for the 30-year Treasury bond futures will likely be after the FOMC meeting is out of the way.
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