SIF’s Higher Despite Mixed Employment Data

STOCK INDEX FUTURES

Non-farm payrolls in January were up 143,000 when a gain of 168,000 was expected.

Private payrolls were up 111,000 when an increase of 140,000 was anticipated, and manufacturing payrolls increased 3,000, which compares to the forecast gain of 5,000.

The unemployment rate was 4.0% when 4.1% was forecast.

Average hourly earnings increased 0.5% when up 0.3% was expected, and the average workweek declined to 34.1 hours when 34.3 hours was anticipated.

The 9:00 central time February consumer sentiment index is expected to be 72.0, and the 9:00 December wholesale inventories report is estimated to show a 0.5% decline.

The 2:00 December consumer credit report is anticipated to show a $16 billion increase.

The U.S. economy is likely to be stronger than the consensus view, and will perform better than economies elsewhere in the world.

CURRENCY FUTURES

The U.S. dollar index is higher despite the on balance weaker than expected U.S. employment data.

In a highly politicized environment we are seeing tendencies for breakouts in both directions failing to follow through.

In the longer term view, interest rate differentials are likely to underpin the greenback.

Industrial production in Germany declined by 2.4% on a monthly basis in December 2024, reversing a downwardly revised 1.3% growth in the previous month and surpassing market predictions of a 0.6% drop.

The Halifax House Price Index in the U.K. increased 3.0% year-on-year in January 2025, which was the slowest pace since July, and easing from an upwardly revised 3.4% in December. On a monthly basis, house prices increased 0.7%, rebounding from a 0.2% decline in December, and better than the expected 0.2% gain.

INTEREST RATE MARKET FUTURES

Futures were higher in the overnight trade but came under pressure when the U.S. employment the numbers were released.

Federal Reserve speakers today are Michelle Bowman at 8:25 and Adriana Kugler at 11:00.

Financial futures market are predicting the Federal Open Market Committee will reduce its fed fund rate by 25 basis points at its June 18 policy meeting. A likely second fed funds rate reduction this year has moved out to the December meeting from the October policy meeting.

The fundamentals and technical aspects have weakened for futures at the front end of the yield curve, and have improved for futures at mid-curve and at the long end of the yield curve.

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