Written Commentary
The Ghost in the Machine Q3 2024
October 8, 2024
STOCK INDEX FUTURES
S&P 500 and NASDAQ futures advanced to new record highs today.
Today’s economic reports were mostly weaker than expected.
Housing starts in May were 1.277 million when 1.373 million were anticipated, and permits were 1.386 million when 1.450 million were estimated.
Jobless claims in the week ended June 15 were 238,000 when 243,000 were predicted.
The Philadelphia Federal Reserve manufacturing index for June was 1.3 when 5.2 was forecast.
CURRENCY FUTURES
The U.S. dollar index continues to be underpinned by flight to safety demand in light of political uncertainties in Europe.
The Bank of England decided to maintain its bank rate at 5.25% at its policy meeting today, as expected, with two members advocating for a decrease to 5.0%. Analysts are pricing in more than a 50% probability of an August rate reduction.
U.K. inflation declined to its 2.0% target for the first time in nearly three years in May.
The Swiss National Bank reduced its key policy rate by 25 basis points to 1.25% at its policy meeting today, following a similar move in the previous meeting, and was in line with market expectations.
Japan’s exports increased for a sixth consecutive month in May, increasing 13.5% from a year earlier. This is up from 8.3% in April and beating the 12.8% gain predicted by economists.
INTEREST RATE MARKET FUTURES
Futures are mostly lower in light of news that a large bank in Japan may be liquidating its position in U.S. Treasuries.
Federal Reserve speakers today are Neel Kashkari at 7:45 central time, Thomas Barkin at 3:00 PM and Mary Daly at 9:15.
Financial futures markets are predicting there is a 66% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
Despite many Fed officials predicting only one fed funds rate reduction this year, financial futures markets are suggesting a second interest rate reduction is likely before the end of the year.
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