Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
The fourth quarter gross domestic product increased 2.7% when up 2.9% was expected, and personal consumption expenditures increased 1.4% when a gain of 2.0% was anticipated.
Jobless claims in the week ended February 18 were 192,000 when 200,000 were predicted.
The Chicago Federal Reserve national activity index was 0.23 when -0.49 was reported last month.
Futures are likely to rebound now that the Fed minutes are out of the way.
CURRENCY FUTURES
The U.S. dollar index is a little lower and has underperformed the news in the last five trading sessions.
Consumer price inflation in the euro area was revised slightly higher to 8.6% year-on-year in January 2023, up from a preliminary estimate of 8.5%, but is still at the lowest level since last May.
The Confederation of British Industry’s distributive trades index increased to +2 in February from -23 in January. Economists anticipated a reading of -13. However, a measure of expected sales in the month ahead declined to -18 from -15.
INTEREST RATE MARKET FUTURES
Minutes from the Federal Open Market Committee’s February 1 policy meeting, released yesterday, showed a large majority of policymakers agreed to slow down the pace of interest rate increases, delivering a smaller 25 basis point hike in February. Policy makers warned that the tightening cycle is not over as inflation risks remain.
Yesterday afternoon New York Fed President John Williams said the central bank must remain committed to its 2.0% inflation goal.
Federal Reserve speakers today are Raphael Bostic at 9:50 central time and Mary Daly at 1:00.
The Treasury will auction seven-year notes today.
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.
There has been lots of hawkish Fed speak lately, while the severely inverted yield curve is getting very little attention.
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