Written Commentary
STOCK INDEX FUTURES
Stock index futures were sharply lower yesterday with follow-through in the overnight trade due to worries about the state of the banking sector.
However, futures temporarily advanced this morning on the belief that the Federal Reserve may be less hawkish in light of today’s release of February employment data.
Average hourly earnings increased 0.2% when up 0.3% was expected, and annualized earnings increased 4.6% when a gain of 4.7% was anticipated.
The unemployment rate increased 3.6%, which compares to the expected 3.4%.
Nonfarm payrolls in February increased 311,000 when up 223,000 was estimated.
Manufacturing payrolls declined 4,000, which compares to expectations of a gain of 10,000.
Private payrolls increased 265,000 when up 213,00 was predicted.
CURRENCY FUTURES
The U.S. dollar is lower due to increasing prospects of a less hawkish Federal Reserve.
The British economy expanded 0.3% month-over-month in January of 2023, beating market forecasts of a 0.1% increase.
The Bank of Japan at its policy meeting today kept short-term interest rates unchanged at negative 10 basis points as predicted by economists.
INTEREST RATE MARKET FUTURES
Futures were supported yesterday and today in a flight to safety move in light of concerns over the health of the banking sector. The March 30-year Treasury bond futures gapped higher.
The Federal Reserve appeared to be on track for a 50 basis point hike at the March 22 policy meeting due to Fed Chair Powell’s comments earlier this week.
However, the outlook for Federal Reserve policy has changed. In light of concerns about the banking system, it now appears more likely that the Federal Reserve will hike its fed funds rate by only 25 basis points at the March 22 policy meeting and not by previously widely expected 50 basis points.
The technicals and fundamental for the March 30-year Treasury bond futures have become more supportive in the past six trading sessions.
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