Written Commentary
STOCK INDEX FUTURES
Stock index futures were higher yesterday with S&P 500 and NASDAQ futures advancing to record highs after the release of the minutes from the Federal Reserve’s June policy meeting.
Traders have been encouraged by the Federal Reserve, which said it doesn’t plan to pull back on supportive policies in the near term.
However, futures are sharply lower today due to worries over global economic growth.
Jobless claims in the week ended July 3 were 373,000 when 353,000 were expected.
The 2:00 May consumer credit report is anticipated to show an $18.0 billion increase.
Stock index futures have shown a tendency in recent months to recover from bearish news.
CURRENCY FUTURES
The European Central Bank announced a new monetary policy strategy today in its first strategy review since 2003.
The ECB indicated it could allow inflation to overshoot when it formally stated that its mission to keep inflation at 2.0% in the euro zone should be understood as a “symmetric” goal over the medium term. This suggests that it could let prices rise more than the target if they have undershot for some time.
INTEREST RATE MARKET FUTURES
The Federal Reserve’s minutes from its June meeting, released Wednesday afternoon, showed policy makers debated how and when to begin pulling back their support for the economy. The minutes reflected the growing division about the timing of interest rate increases and tapering back asset purchases.
Futures are higher today reflecting investors’ anxiety, as concerns over the strength of the economic recovery picked up and inflation fears ebbed.
The yield on the 10-year Treasury notes declined to its lowest since February amid mounting concerns over a slowdown in U.S. and global growth and expectations the Fed will not tighten monetary policy soon.
The U.S. Treasury yield curve has been flattening since May with shorter-dated yields increasing to reflect higher rate expectations, while longer-dated yields fell because higher interest rates in the near term would likely mean a slower rate of growth in the future.
The interest rate futures markets have been telegraphing for several months clues about the state of the global economy.
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