Written Commentary
STOCK INDEX FUTURES
Yesterday March S&P 500 and March NASDAQ futures on the daily charts broke out above a three-week downtrend lines.
Stock index futures are mixed today.
This morning’s economic reports were mixed.
Retail sales in January declined 0.9% when down 0.1% was expected.
Import prices in January increased 0.3% when a 0.4% gain was anticipated, and export prices were up 1.3% when a 0.3% increase was estimated.
The 8:15 central time January industrial production report is predicted to show a 0.3% increase, and January capacity utilization is forecast to be 77.7%.
The 9:00 December business inventories report is expected to show a 0.3% increase.
The bullish influence of an improving economic outlook in the U.S. is likely to more than offset the bearish impact of a Federal Reserve that is likely to be slow to move to additional accommodation.
CURRENCY FUTURES
The U.S. dollar index is lower due to easing trade concerns. On Thursday, President Donald Trump said that reciprocal trade tariffs would be imposed individually on countries and not be implemented immediately. This delay in action helped reduce fears of immediate retaliatory measures, which sparked inflationary concerns and uncertainties over the Federal Reserve’s scope to cut borrowing costs.
The euro zone economy grew by 0.1% in the last quarter of 2024, which is slightly better than the initially reported unchanged reading.
Analysts are anticipating the Reserve Bank of Australia will lower its cash rate by 25 basis points to 4.10% at its policy meeting on February 18.
In addition, median forecasts project an additional 75 basis points of cuts this year from the RBA.
INTEREST RATE MARKET FUTURES
Futures are mixed to lower at the front end of the yield curve and are higher at mid-curve and at the long end of the yield curve.
Lorie Logan of the Federal Reserve will speak at 2:00 PM.
Financial futures markets are predicting the Federal Open Market Committee will keep its fed funds rate unchanged at its March, May and June policy meetings. However, financial futures markets are predicting the Federal Reserve will reduce its fed funds rate by 25 basis points at its July meeting.
An additional interest rate reduction from the FOMC is unlikely until next year.
The fundamentals and technical aspects have weakened for futures at the front end of the yield curve.
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