Written Commentary
STOCK INDEX FUTURES
S&P 500, NASDAQ and Dow futures advanced to record highs yesterday. However, it is a different story today. Futures quickly declined when the January consumer price index report was released.
The January consumer price index came in at up 0.3% when a gain of 0.2% was expected. The January consumer price index, excluding food and energy, was up 0.4% when an increase of 0.3% was anticipated.
The National Federation of Independent small business optimism index was 89.9 in January, which is the lowest in eight months, when 92.4 was predicted.
Despite today’s CPI inspired selling, the long term fundamentals and technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index was a little lower the overnight trade, but quickly advanced to new highs for the move when the larger than predicted increase in the January consumer price index was released.
Interest rate differentials remain supportive to the greenback.
German investor morale improved more than estimated in February, according to the ZEW economic research institute. The institute reported an improvement in its economic sentiment index to 19.9 points from 15.2 points in January. The February increase, the seventh in a row, beat expectations of a reading of 17.5.
The annual inflation rate in Switzerland fell to 1.3% in January 2024 from 1.7% in the previous month, and came in less than market forecasts of 1.7%. This was the lowest reading since October 2021.
Australian consumer confidence in February was the highest since June 2022. The Westpac Melbourne Institute consumer sentiment index rose 6.2% to 86 in February from 81 in January.
INTEREST RATE MARKET FUTURES
Futures were steady at the front of the curve and a little higher at the long end of the curve in the overnight trade. However, prices quickly decline when the higher than expected January consumer price index was reported.
Financial futures markets are predicting there is a 5.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the March 20 meeting, and there is a 95% chance that the Fed will keep rates unchanged.
The fundamentals and technicals are not encouraging for the bull camp.
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