Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures are rebounding today after the three major averages declined more than 1.0% in the previous session as the higher-than-expected U.S. inflation report reduced prospects that the Federal Open Market Committee will lower interest rates soon.
Despite yesterday’s consumer price index inspired selling, the fundamentals and technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is a little lower.
Interest rate differentials remain supportive to the greenback.
The euro zone fourth quarter gross domestic product on a quarter-to-quarter basis was unchanged as anticipated.
Euro zone industrial production increased 2.6% on month in December when a 0.2% decline was predicted.
Annual U.K inflation unexpectedly held steady at 4.0% in January when economists had forecast an increase in the annual rate to 4.2%. This paves the way for the Bank of England to start cutting borrowing costs from their 16-year high. There is approximately a 72% probability that the BoE will lower its key interest rate in June.
INTEREST RATE MARKET FUTURES
Futures are steady at the front of the curve and a little higher at the long end of the curve.
The yield on the U.S. 10-year Treasury note increased to around 4.30%.
Federal Reserve speakers today are Austan Goolsbee at 8:30 central time and Michael Barr at 3:00.
Financial futures markets are predicting there is an 8.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the March 20 meeting, and there is a 92% chance that the Fed will keep rates unchanged.
The fundamentals and technicals are not encouraging for the bullish case.
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