Written Commentary
STOCK INDEX FUTURES
Stock index futures were sharply lower yesterday with follow-through selling today due to worries about the possibility of a hard landing for the economy.
The 9:00 central time July factory orders report is expected to show a 4.6% increase, and the 9:00 July Job Openings and Labor Turnover Survey (JOLTS) is anticipated to be 8.1 million.
The Federal Reserve will release its Beige Book on the economy at 1:00. This book is released approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles data on economic conditions from each of the 12 Federal Reserve districts.
Seasonally, September has been a weak month for stock index futures. Futures have been lower for the month of September in the last four years.
CURRENCY FUTURES
After recent gains the U.S. dollar index is lower today.
Although lower today, the greenback remains above a steep downtrend line that started in early August.
The euro zone August services PMI was 52.9 when 53.3 was forecast.
The euro zone July producer price index increased 0.8% on the month when up 0.3% was estimated.
The safe-haven Japanese yen remained firm on Wednesday.
The Australian economy grew by 0.2% quarter-to-quarter in the second quarter of 2024, falling short of market forecasts of 0.3% growth.
INTEREST RATE MARKET FUTURES
In light of recent stock index weakness, flight to quality buying is coming into the interest rate market futures, and downtrend lines have been penetrated to the upside.
Prospects of a 50 basis point decline in the fed funds rate at the upcoming Federal Open Market Committee meeting have substantially increased from where they were just a few days ago.
There is a 61% probability that the Federal Open Market Committee will lower its funds rate by 25 basis points at its September 18 meeting, and there is a 39% probability that the FOMC will reduce its key interest rate by 50 basis points in September.
The main trend for futures is higher.
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