Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower across the board in advance of Federal Reserve Chair Jerome Powell’s 9:00 central time testimony to the Senate Banking Committee. Tomorrow Powell will appear before the House Financial Services Committee at 9:00.
The January National Federation of Independent Business small business optimism index in the U.S. fell to 102.8 in January 2025 from 105.1 in December 2024, which was the highest since October 2018, and under forecasts of 104.6.
The U.S. economy is likely to be stronger than the consensus view, and will perform better than economies elsewhere in the world, which should provide underlying support to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is slightly lower today after three days of higher prices as traders even up ahead of Fed Chair Powell’s congressional testimony.
Political influences continue to dominate price movements.
In the longer term view, interest rate differentials are likely to underpin the greenback.
Germany’s trade surplus with the U.S. increased to a record level. Germany’s trade surplus with the U.S. expanded to 70 billion euros in 2024, which is well above the previous record of 63.3 billion euros that was reported for the full year 2023.
INTEREST RATE MARKET FUTURES
Futures are mixed to lower.
The U.S. Treasury will auction three-year notes today.
In addition to Federal Reserve Chair Powell, other Federal Reserve speakers today are John Williams at 2:30 and Michelle Bowman at 2:30.
Financial futures market are predicting the Federal Open Market Committee will probably keep its fed funds rate unchanged at the March 19 and May 7 policy meetings. However, financial futures markets are predicting the Federal Reserve will reduce its fed funds rate by 25 basis points either and it’s June 18 policy meeting or at its July 30 meeting. Also, an additional interest rate reduction from the FOMC this year is becoming less likely.
The fundamentals and technical aspects have weakened for futures at the front end of the yield curve, and have improved for futures at mid-curve and at the long end of the yield curve.
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