Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
U.S. stock index futures posted their best day yesterday since March as upbeat earnings outweighed inflation fears.
Futures are higher today despite crude oil prices climbing to their highest level in seven years.
Retail sales in September increased 0.7% when a decline of 0.1% was expected.
The October Empire State manufacturing index was 19.8 when 25.0 was anticipated.
The 9:00 central time October consumer sentiment index is predicted to be 74.0 and the 9:00 August business inventories report is estimated to show a 0.7% increase.
The longer-term fundamental and technical aspects remain supportive for stock index futures.
CURRENCY FUTURES
The U.S. dollar index was underpinned by the stronger than expected U.S. retail sales report. However, gains were limited by the weak Empire State manufacturing index.
Interest rate differential expectations remain supportive to the greenback, and higher prices are likely at least up until the November 3 Federal Open Market Committee policy meeting.
Passenger car registrations in the E.U. slumped 23.1% in September of 2021, which is the lowest number for the month of September since 1995.
The Japanese yen fell to its lowest level since 2018, while the Bank of Japan is expected to continue its ultra-accommodative monetary policies.
Pressure on the Japanese yen is linked to concerns that high crude oil and gas prices will pressure economic growth in Japan, since Japan is a major energy importer.
INTEREST RATE MARKET FUTURES
Futures are mostly lower on the belief that the Federal Open Market Committee will announce details of a tapering of its asset-purchase program at its November policy meeting.
In addition, some pressure on futures is due to the stronger than expected retail sales report.
Federal Reserve speakers today are James Bullard at 11:20 and John Williams at 12:00.
The next leg up for the 30-year Treasury bond futures will likely be after the next FOMC meeting on November 3 is out of the way.
I believe a tapering from the FOMC will be a dovish tapering with any reduction being small.
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