Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher in light of mostly better than expected U.S. bank earnings reports.
S&P 500 and Dow futures hit record highs today.
Futures continued to advance despite the bearish interest rate implications of this morning’s stronger than anticipated economic reports.
Retail sales in September increased 0.4% when up 0.3% was expected, and the October Philadelphia Federal Reserve manufacturing index was 10.3 when 3.0 was anticipated.
Jobless claims in the week ended October 12 were 241,000 when 260,000 were forecast.
Industrial production in September declined 0.3% when a 0.1% drop was expected, and capacity utilization was 77.5% when 77.8% was estimated.
The 9:00 central time October housing market index is forecast to be 42, and the 9:00 August business inventories report is expected to show a 0.3% increase.
The technical aspects for stock index futures remain supportive.
CURRENCY FUTURES
The U.S. dollar index advanced to its highest level since August 2 in the overnight trade, and there were additional gains when the U.S. 7:30 economic reports were released.
Interest rate differentials remain supportive to the greenback.
The European Central Bank lowered its three key interest rates as expected, following reductions in September and June.
The annual inflation rate in the euro area was revised lower to 1.7% in September, which compares to initial estimates of 1.8%. Inflation is now below the ECB’s target of 2.0%.
Australia’s labor market grew more than expected in September. The total number of employed people increased by 64,100 in September and was well above expectations of an increase of 25,200 people.
Australia’s labor participation rate unexpectedly increased to 67.2% and remains close to record highs. The unemployment rate was steady at 4.1%.
Exports from Japan shrank by 1.7% year-over-year in September, which missed market forecasts of a 0.5% advance and was the first decline since November 2023.
INTEREST RATE MARKET FUTURES
Futures came under pressure, especially the 30-year U.S. Treasury bond futures, when the 7:30 U.S. economic reports were released.
Austan Goolsbee of the Federal Reserve will speak at 10:00.
Currently there is an 89% probability that the FOMC will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is an 11% chance that the FOMC will keep its key interest rate unchanged at 4.75% – 5.00%.
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