Written Commentary
STOCK INDEX FUTURES
September S&P 500 futures advanced above a double top pattern yesterday.
Stock index futures were higher the overnight trade as corporate earnings season kicks off.
There was additional support for futures when the June producer price index report showed an increase of 0.1% when up 0.2% was expected.
Jobless claims in the week ended July 8 were 237,000 when 249,000 were anticipated.
Many analysts continue to lean to the bearish side, which from a contrarian point of view suggests higher prices, at least in the short term.
CURRENCY FUTURES
The U.S. dollar index fell to its lowest level since April 2022.
Industrial production in the euro area increased 0.2% month-over-month in May 2023, easing from a 1.0% increase the month prior and slightly missing market expectations of 0.3% growth.
The U.K. economy contracted 0.1% month-over-month in May 2023, following 0.2% growth in April and compared to forecasts of a 0.3% decline.
Yesterday the Bank of Canada raised its overnight interest rate by 25 basis to 5.00% from 4.75%, which is a new 22-year high. Canada’s central bank said the path toward its 2.0% inflation target would take longer than planned.
INTEREST RATE MARKET FUTURES
Futures are higher in response to today’s bullish producer price index report.
Christopher Waller of the Federal Reserve will speak at 5:45 central time this afternoon.
The Treasury will auction 30-year bonds.
Financial futures markets are predicting there is a 92% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points at the July 26 meeting, and there is an 8% chance that the fed funds rate will remain unchanged.
Traders are becoming increasingly confident that the end of the Fed’s tightening cycle is close.
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