Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures are mixed despite more hawkish commentary from Federal Reserve officials.
Jobless claims in the week ended February 25 were 190,000 when 200,000 were expected.
Annual nonfarm productivity in the fourth quarter increased 1.7% when up 2.5% was anticipated and unit labor costs increased 3.2%, which compares to the anticipated gain of 1.4%.
Analysts’ outlooks on stock index futures remains very bearish.
CURRENCY FUTURES
The U.S. dollar is higher, and the euro currency is lower.
The euro currency is lower despite news that euro zone inflation moderated less than expected in February. Consumer prices increased 8.5% in February compared with the same month a year earlier, easing slightly from an 8.6% annual increase in January. The reading exceeds the 8.2% consensus forecast. The euro area’s core consumer price index in February hit a new record high at 5.6% compared to the anticipated 5.3%.
The euro zone’s unemployment rate was 6.7% in January, which is unchanged from a revised 6.7% in December.
The European Central Bank is expected to increase interest rates by 50 basis points at its next meeting on March 16
U.K. businesses scaled back plans for price increases in February, according to a Bank of England survey. Businesses surveyed in February expected to hike their prices by 5.4% over the coming year, which is down from 5.8% in January and the smallest planned increase since February 2022.
INTEREST RATE MARKET FUTURES
Minneapolis Federal Reserve Bank President Neel Kashkari said Wednesday he is remaining “open-minded” about whether the Federal Reserve should hike rates by 25 or 50 basis points at its next policy meeting on March 22.
Federal Reserve speakers today are Christopher Waller at 3:00 central time and Neel Kashkari at 5:00.
Most likely the Federal Open Market Committee will increase its fed funds rate by 25 basis points at its March 22 policy meeting, and there is more talk of another 25 basis point hike at the May meeting.
The severely inverted yield curve is becoming even more inverted but continues to get very little attention.
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