Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures are lower today, after last week the S&P 500 advanced to a six-week high.
The January Dallas Federal Reserve’s manufacturing survey will be released at 9:30 central time. In December the survey showed -18.8.
This week is the busiest week for fourth quarter earnings releases with 107 S&P 500 companies reporting.
Stock index futures are likely to trade sideways ahead to the Wednesday’s Federal Open Market Committee meeting, as traders even up positions.
CURRENCY FUTURES
The U.S. dollar index is lower, although futures remain in a trading range.
Interest rate differentials are neutral for the U.S. dollar.
The German economy contracted by 0.2% in the fourth quarter, following growth of 0.5% in the third quarter.
Economic sentiment in the euro zone improved more than expected in January. The euro zone’s economic sentiment indicator, which is an aggregate measure of business and consumer confidence, increased to 99.9 in January from an upwardly revised 97.1 in December. This marks the highest level since June. Economists expected the index to come in at 96.8.
Traders are positioning for big monetary policy events this week, with the Federal Reserve decision due on Wednesday and both the Bank of England and the European Central Bank on Thursday. Both the BoE and the ECB are set to hike their key interest rates by 50 basis points.
INTEREST RATE MARKET FUTURES
The Federal Reserve will likely slow the pace of tightening at the end of its two-day policy meeting on Wednesday due to mounting evidence that inflation in the U.S has begun to ease.
According to financial futures markets, currently there is a 98.0% of probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points and a 2.0% probability of a 50 basis point hike at the February 1 policy meeting.
The long term outlook for futures is higher.
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