Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures declined when the producer price index report was released.
The producer price index in January increased 0.3% when a gain of 0.1% was expected, and the producer price index, excluding food and energy, was up 0.5% when up 0.1% was anticipated.
Housing starts in January were 1.331 million when 1.470 million were predicted, and building permits were 1.470 million when 1.510 million were forecast.
The 9:00 central time February consumer sentiment index is expected to be 80.
Stock index futures are likely to trade higher later today from the current lower prices that were inspired by the bearish producer price index report.
The fundamentals and technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is higher due to the larger than predicted increase in the U.S. producer price index.
Interest rate differentials remain supportive to the greenback longer term.
Germany’s wholesale prices fell by 2.7% year-on-year in January 2024, following a 2.6% decline in the previous month.
Industrial production in Switzerland fell 0.4% year-on-year in the fourth quarter of 2023, reversing from a downwardly revised 1.8% drop in the previous quarter.
Retail sales volumes in the U.K. rebounded by 3.4% month-over-month in January 2024, following a sharp decline of 3.3% in December and easily surpassing market expectations of a 1.5% gain.
INTEREST RATE MARKET FUTURES
Federal Reserve Bank of Atlanta President Raphael Bostic said late Thursday there is no urgency for the Federal Reserve to cut interest rates, and the battle with inflation is not over yet.
Futures quickly declined when the larger than expected increase in the producer price index was reported.
Federal Reserve speakers today are Michael Barr at 8:10 and Mary Daly at 11:10.
Financial futures markets are predicting there is a 6.0% 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 94% chance that the Fed will keep rates unchanged.
The fundamentals and technicals remain bearish on balance.
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