Housing Starts Less Than Anticipated

STOCK INDEX FUTURES

Stock index futures are lower due to fears of a wider conflict in the Middle East. However, some of this selling pressure in being offset by prospects of a less hawkish Federal Reserve.

Housing starts in September were 1.358 million when 1.394 were expected, and building permits were 1.473 million when 1.450 million were anticipated.

U.S. mortgage applications hit a 28-year low as mortgage rates continue to increase.

CURRENCY FUTURES

The U.S. dollar is a little higher.

In recent days there appears to be only a limited flight-to-quality flow of funds into the greenback.

The U.S. dollar continues to underperform the news.

The euro zone consumer price index in September increased 0.3% as predicted, and on an annualized basis it was up 4.3% as forecast.

The inflation rate in the U.K. remained stable at 6.7% in September 2023, holding at August’s 18-month low. Market expectations were a slight decrease to 6.6%.

INTEREST RATE MARKET FUTURES

Philadelphia Federal Reserve President Patrick Harker in a Tuesday interview said he thinks the central bank can likely wait until early next year to decide whether interest rate increases over the past 20 months have done enough to keep inflation headed lower.

Market participants are closely monitoring comments from Federal Reserve officials this week. Federal Reserve speakers today are Christopher Waller at 11:00 central time, John Williams at 11:30, Patrick Harker at 2:15 and Lisa Cook at 5:55.

Federal Reserve Chair Powell will speak before the Economic Club of New York on Thursday.

The Treasury will auction 20-year bonds.

The Federal Open Market Committee will release its Beige Book on the economy at 1:00. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles  evidence on economic conditions from each of the 12 Federal Reserve districts.

Recent dovish comments from Federal Reserve officials reduced expectations of another interest rate hike this year.

Financial futures markets are now predicting there is an 89% probability that the Federal Open Market Committee will keep its fed funds rate unchanged and an 11% probability of a 25 basis point increase at its November 1 policy meeting.

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