Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher due to news that a tentative agreement on some of the dock workers issues has been reached. The International Longshoremen’s Association and the U.S. Maritime Alliance said they reached a tentative agreement on wages and have agreed to extend the Master Contract until January 15, 2025 to return to the bargaining table to negotiate other outstanding issues.
Nonfarm payrolls in September were up 254,000 when a gain of 140,000 was expected, and private payrolls increased 223,000 when up 125,000 was anticipated. Manufacturing payrolls declined 7,000 when down 5,000 was forecast.
Average weekly hours declined to 34.2 when 34.3 was expected, and the unemployment rate was 4.1%, which compares to the estimated 4.2%.
It is a sign of strength for futures to advance when the September employment report suggests the Federal Reserve is less likely to aggressively ease credit conditions.
CURRENCY FUTURES
The U.S. dollar index advanced when the September employment numbers were released. This report suggests the Federal Reserve is less likely to aggressively lower its fed funds rate, which is supportive to the U.S. dollar.
On Tuesday the U.S. dollar index broke out above a downtrend line that started in July.
The greenback is trading at its highest level since August 16.
INTEREST RATE MARKET FUTURES
Futures came under pressure when the September employment report was released.
John Williams, Vice Chair of the Federal Open Market Committee will speak at 8:00 AM central time.
It is widely expected that the Federal Open Market Committee will reduce its key interest rate again at its November meeting. However, in light of today’s employment report there is a greater probability of the Federal Reserve cutting its fed funds rate by only 25 basis points.
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 reduce its key rate by 50 basis points.
Futures at the short end of the yield curve are likely to outperform futures at the long end of the yield curve since the Federal Reserve is anticipated to continue its accommodative policies well into 2025.
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