Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are mixed to lower due to political and economic uncertainties.
The December National Federation of Independent Business Small Business Optimism Index fell significantly in December to a seven-month low to 95.9 when 102.0 was expected.
The November Job Openings and Labor Turnover Survey (JOLTS) report will be released at 9:00 central time. Last month the report showed 6.652 million.
Earnings season will kick off later in the week with reports from major U.S. banks. Some analysts are predicting S&P 500 earnings may decline 12% year-over-year in the final three months of 2020.
CURRENCY FUTURES
The U.S. dollar index firmed on expectations of more fiscal stimulus.
Longer term, the U.S. dollar is likely to trend lower due to expectations for an extended period of low interest rates and concerns over rising U.S. levels of debt.
The euro currency is lower. However, interest rate differential expectations suggest higher prices for the euro longer term.
The British pound is higher in spite of expectations that the Bank of England will be announcing more policy easing in the coming months. Financial futures markets now are predicting the central bank could take interest rates into negative territory as early as in May.
The Japanese yen is lower despite December bank lending increasing 5.9% on the year.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures are lower and are at the lowest level since March 2020.
Some of the selling is linked to comments from Federal Reserve Bank of Atlanta President Raphael Bostic when he said that if the economy snaps back quickly, the Federal Reserve may be able to start paring back its bond-buying stimulus efforts later this year.
Federal Reserve speakers today are Raphael Bostic at 8:30, Lael Brainard at 8:35, Robert Kaplan at 10:00, Raphael Bostic at 10:00, Loretta Mester at 11:00 and Esther George at 12:00.
The Treasury Department will auction $38 billion in 10-year notes today and $24 billion in 30-year bonds Wednesday. On Monday, it auctioned a record $58 billion in three-year notes.
Financial futures markets are predicting there is a 95.2% probability that the Federal Open Market Committee will keep its key fed funds rate unchanged at 0 to 25 basis points at its January 27, 2021 policy meeting.
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