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Indexes Higher Despite Weak Housing Report

STOCK INDEX FUTURES

U.S. stock index futures are higher as upbeat earnings outweigh inflation fears. So far, 80% of the S&P 500 companies that have reported earnings beat market predictions, according to FactSet.

Futures are higher despite crude oil prices remaining near seven-year highs.

Housing starts in September were 1.555 million when 1.621 million were expected and building permits were 1.589 million, which compares to the anticipated 1.680 million.

The longer-term fundamental and technical aspects remain supportive for stock index futures.

CURRENCY FUTURESS&P 500

The U.S. dollar index is lower, hit by a proliferation in rate-hike prospects in other markets.

With Fed tightening probabilities priced in, money markets are showing increasing chances for policy normalization elsewhere, especially in the U.K. where a cumulative 35 basis points in rate hikes are priced in by the end of this year.

However, as we get closer to the November 3 Federal Open Market Committee meeting, traders are likely to refocus their attention on prospects of the Fed tapering its $120 billion a month in asset- purchases.

Construction output in the euro area dropped by 1.6% year-on-year in August 2021, which is the first month of contraction since a recovery started in March 2020. Building activity fell by 1.3%.

The British Pound hit a five-week high as rate hikes appear more likely. Bank of England Governor Andrew Bailey’s comments yesterday suggested November and December monetary policy committee meetings are becoming more likely for a rate hike announcement.

INTEREST RATE MARKET FUTURES 

The 30-year Treasury bond futures are lower on the belief that the Federal Open Market Committee will announce details of a tapering of its asset-purchase program at its November policy meeting.

There was only limited support on news that housing starts and building permits came in weaker than predicted.

Federal Reserve speakers today are Mary Daly at 7:00, Patrick Harker at 7:50, Raphael Bostic at 12:00 and also at 1:50.

The next leg up for the 30-year Treasury bond futures will likely be after the next FOMC meeting on November 3 is out of the way.

I believe a tapering  from the FOMC will be a dovish tapering with any reduction being small.

The question must be asked; While central banks are removing accommodation to fight inflation this year, what will central banks need to do next year to address a slowing global economy?

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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