Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are mixed.
Mortgage applications increased 1.7% and applications to refinance a home loan advanced 3.0% in the week ended January 1, according to the Mortgage Bankers Association.
The December ADP employment report showed a decline of 123,000, the worst since April, when an increase of 130,000 was expected.
The 8:45 central time December PMI composite final is anticipated to be 55.7.
The 9:00 November factory orders report is estimated to show a 0.6% increase.
CURRENCY FUTURES
The U.S. dollar index fell to its lowest level since May 2018.
Longer term, the U.S. dollar is likely to trend lower due to expectations for an extended period of low interest rates and concerns over rising U.S. levels of debt.
The euro currency traded at its highest level since May 2018.
The euro is higher despite news that the euro zone services PMI was revised lower to 46.4 in December 2020, down from a preliminary estimate of 47.3 and compared with November’s six-month low of 41.7. The forecast was 47.3.
In November 2020, industrial producer prices rose by 0.4% in both the euro area and the E.U., compared with October 2020, according to estimates from Eurostat.
INTEREST RATE MARKET FUTURES
Futures are mixed at the front of the curve and are sharply lower at the long end of the curve.
The 30-year Treasury bond futures fell to the lowest since April 2020. Futures are lower despite news of the jobs decline in the ADP employment report, which should be viewed as a sign of weakness.
At 1:00 the Federal Open Market Committee will release the minutes from its December 16 policy meeting.
Financial futures markets are predicting there is a 95.9% probability that the Federal Open Market Committee will keep its key fed funds rate unchanged at 0 to 25 basis points at its January 27, 2021 policy meeting. Yesterday the probability was 95.2%
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