Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures are higher, building on last week’s gains as U.S. Treasury yields retreated further from recent highs.
The 9:00 central time January factory orders report is expected to show a 1.8% decline.
Federal Reserve Chair Jerome Powell is scheduled to testify before the Senate Banking Committee on Tuesday at 9:00 and to the House Financial Services Committee at 9:00 on Wednesday, in sessions that will be closely watched for signals about the economy and interest rate policies.
CURRENCY FUTURES
The U.S. dollar is lower, and the euro currency is higher.
Retail trade in the euro area increased by 0.3% from a month earlier in January 2023, following a downwardly revised 1.7% decline in December and missing market expectations for 1.0% growth.
The annual inflation rate in Switzerland slightly increased to 3.4% year-on-year in February of 2023, the highest level since August 2022, from 3.3% in the prior month and above market predictions of 3.1%.
The Bank of Japan’s latest policy decision is due Friday. The central bank is predicted to keep short term interest rates unchanged at negative 10 basis points.
INTEREST RATE MARKET FUTURES
Federal Reserve Chair Jerome Powell’s testimony this week is likely to echo what other Fed officials have recently said, suggesting interest rates will go higher than policymakers anticipated just a few weeks ago if economic data comes is strong.
Most likely the Federal Open Market Committee will increase its fed funds rate by 25 basis points at its March 22 policy meeting, and there is more talk of another 25 basis point hike at the May meeting.
The severely inverted yield curve is becoming even more inverted but continues to get very little attention.
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