Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher today after chart breakouts to the upside yesterday.
The 8:45 central time January Manufacturing PMI final is expected to be 55.0.
The 9:00 January Institute for Supply Management Manufacturing Index is anticipated to be 57.5.
The 9:00 December construction spending report is estimated to show a 0.7% increase.
The 9:00 December Job Openings and Labor Turnover Survey (JOLTS) is predicted to be 10.500 million. The JOLTS report tracks monthly changes in job openings and offers rates on hiring and quits.
Of the 172 companies in the S&P 500 that have reported earnings so far, 78.5% of them topped analysts’ estimates, according to Refinitiv.
CURRENCY FUTURES
The euro currency traded higher on news that the unemployment rate in the euro area declined to a record low of 7.0% in December of 2021 from a downwardly revised 7.1% in November, and slightly below market forecasts of 7.1%
Gains in the euro were limited due to a report that showed retail sales in Germany fell 5.5% in December, following a 0.6% increase in November.
The European Central Bank will hold its policy meeting on Thursday. No change in policy is predicted.
The number of mortgage approvals for a house purchase in the U.K. increased slightly to 71,000 in December of 2021, which is the highest since September.
The Bank of England will hold its policy meeting on Thursday. Economists expect the Monetary Policy Committee to announce a 25 basis point hike, taking the bank rate to 50 basis points. Financial futures markets have priced in up to four Bank of England interest rate increases this year, which in the longer term, will likely support the British pound.
The Canadian economy expanded 0.6% month-over-month in November of 2021, following a 0.8% increase in October and above market expectations of a 0.3% gain.
INTEREST RATE MARKET FUTURES
Recently, Atlanta Federal Reserve President Rafael Bostic suggested a 50 basis point hike in the fed funds rate is possible at the March 16 Federal Open Market Committee meeting.
However, yesterday he clarified that “a 50 basis point hike is not his preferred policy action for March.”
Many market participants now expect five fed funds rate hikes in 2022.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also the global economy, it may be difficult for the Federal Reserve to maintain its ramped-up hawkish policy stance.
Tighter credit policies from the Fed appear to be fully reflected in current futures pricing.
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