Interest Rates Higher as Indices Lower

STOCK INDEX FUTURES

Stock index futures are lower due to several large corporations reporting weaker than expected earnings.

Earnings season kicks into higher gear this week with more than a third of S&P 500 companies  reporting.

Today is the first day of the two-day Federal Open Market Committee policy meeting.

There are three 9:00 central time reports. The July consumer confidence index report is expected to show 96.8. June new home sales are anticipated to be 644,000 and the July Richmond Federal Reserve manufacturing index is estimated to be -10.

Futures have recently been supported by the belief that the Federal Open Market Committee is becoming less hawkish.

In addition, the technical aspects are becoming more friendly.

CURRENCY FUTURES

The U.S. dollar index is higher.

The euro currency is lower due to recession concerns and the ongoing energy crisis in Europe.

Longer term, lower prices are likely for the euro currency.

The Confederation of British Industry’s distributive trades survey’s retail sales balance in the U.K. was at -4.0 in July of 2022 from -5.0 in June, showing that retail sales volumes continued to decline slightly for a fourth consecutive month.

The Japanese yen is higher on news that Japan upgraded its overall view on the economy for the first time in three months in July.

INTEREST RATE MARKET FUTURES

Futures are higher today in response to lower stock index futures.

The Treasury will auction five-year notes today.

According to financial futures markets, there is a 75.1% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 24.9% probability that the rate will increase by 100 basis points at the July 27 meeting.

Last week the 30-year Treasury bond futures broke out above a two-week symmetrical triangle pattern.

Higher prices are likely for the interest rate market futures on the growing belief that the Federal Open Market Committee is becoming less hawkish.

In addition, there is speculation that the Federal Open Market Committee will return to accommodation next year.

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