Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher attempting a rebound from sharp losses in the previous session on expectations Ukraine and Russia will resume talks today.
Federal Reserve Chairman Jerome Powell’s prepared remarks in advance of his testimony to the House Financial Services Committee at 9:00 central time showed the Fed is on track to raise interest rates at its March 16 policy meeting. Mr. Powell said it would be appropriate for the central bank to raise its benchmark interest rate amid high inflation, strong economic demand and a tight labor market.
Powell will testify before the Senate Banking Committee tomorrow at 9:00.
Mortgage applications in the U.S. were down 0.7% in the week ended February 25, which is the lowest level since December of 2019. It was the fourth straight week of declines, according to data from the Mortgage Bankers Association. Applications to purchase a home fell 1.8%.
The national employment report from Automated Data Processing, Inc. showed private businesses in the U.S. hired 475,000 workers in February of 2022, beating market expectations of a 320,000 increase.
The Federal Reserve will release its “Beige Book” on the economy at 1:00 central time. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee.
The dominant influences remain geopolitical tensions followed by the hawkish Federal Reserve.
CURRENCY FUTURES
Flight to quality longs are being established in the U.S. dollar, as investors continue a flight to safety.
The euro currency weakened the lowest level since May 2020, with investors now cutting back their expectations for European Central Bank rate hikes this year.
Most economists anticipate the Bank of Canada will raise its benchmark interest rate by a quarter percentage point to 0.5% at a policy decision today.
Growth in Japan’s core inflation rate slowed to 0.2% in January, falling short of expectations and remaining well under the central bank’s target. The Bank of Japan has repeatedly maintained that it will keep ultra-loose monetary policies to support the economic recovery and achieve the 2.0% inflation target.
INTEREST RATE MARKET FUTURES
Some flight to quality longs were liquidated.
Federal Reserve speakers today are Charles Evans at 8:00 and James Bullard at 8:30.
Financial futures markets are predicting there is a 90.5% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points at its March 16 policy meeting. The probability for a 50 basis point hike is 9.5%. A few weeks ago the probability of a 50 basis point rate increase was over 50%.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also globally, it may be difficult for the Federal Reserve and other major central banks to maintain ramped-up hawkish policies.
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