Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures were lower in the overnight trade. However, futures were able to recover and trade higher on news that jobless claims in the week ended March 4 were 211,000 when 195,000 were expected. This supported stock index futures on the logic that the larger than anticipated jobless claims report may influence the Federal Reserve to be less hawkish.
Separately, according to Challenger, Gray & Christmas, Inc., U.S. based employers announced 77,770 job cuts in February of 2023, which was the highest number since September of 2020. Also, this was the biggest total for any February month since 2009.
CURRENCY FUTURES
The larger than predicted jobless claims report put pressure on the U.S. dollar.
The Bank of Canada kept its main interest rate unchanged on Wednesday, which is the first time it has done so in about a year. The BoC argued that economic reports point to inflation sharply decelerating this year toward its 2.0% target. In its latest policy announcement, the central bank held its target for the overnight rate at 4.50%, following a 25 basis point increase in January.
The Japanese economy stagnated quarter-on-quarter in the fourth quarter of 2022 compared with a flash figure of 0.2% growth and after a 0.3% contraction in the previous period.
The Bank of Japan’s latest policy decision is due Friday. The central bank is predicted to keep short term interest rates unchanged at negative 10 basis points.
INTEREST RATE MARKET FUTURES
Futures were supported by the jobless claims report.
The Treasury will auction 30-year bonds today.
Michael Barr of the Federal Reserve will speak at 9:00 central time.
In light of Fed Chair Powell’s recent comments, the Fed appears to be on track for a 50 basis point hike at the March 22 policy meeting.
The severely inverted yield curve became even more inverted this week but continues to get very little attention.
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