Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
The Mortgage Bankers’ Association’s composite index in the week ended February 17 fell 13.3% after a 7.7% decline in the previous week.
Stock index futures declined yesterday on the belief that today’s 1:00 central time release of the minutes of the Federal Open Market Committee’s February 1 policy meeting will contain hawkish rhetoric.
Futures are likely to rebound once the Fed minutes are out of the way.
CURRENCY FUTURES
The U.S. dollar index is a little lower and has underperformed the news in the last few trading sessions.
Sentiment among German businesses matched economists’ expectations improving in February for a fifth consecutive month. The Ifo business climate index increased to 91.1 in February from 90.1 in January, which was the highest reading since June. The Ifo index is based on a poll of approximately 9,000 companies in manufacturing, services, trade and construction.
Yesterday it was a reported that Canada’s annual inflation rate eased more than expected in January to 5.9%, which should allow the Bank of Canada to keep interest rates unchanged at its March policy meeting. Analysts expected inflation to edge lower to 6.1% from 6.3% in December.
Australian wages grew at the fastest annual pace in a decade last quarter but that was still less than market forecasts. The Australian Bureau of Statistics showed its wage price index increased 0.8% in the December quarter from the previous quarter, which is under forecasts for a 1.0% increase.
INTEREST RATE MARKET FUTURES
St. Louis Federal Reserve Bank President James Bullard today said a more aggressive interest rate increase now would give the Federal Open Market Committee a better chance to bring down inflation. He also said, “we have a good shot at beating inflation in 2023” without creating a recession.
John Williams of the Federal Reserve will speak at 4:30.
The Treasury will auction five-year notes today.
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.
There has been lots of hawkish Fed speak lately, while the severely inverted yield curve is getting very little attention.
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