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Better Corporate Earnings Support Indices


Stock index futures are higher despite ongoing concerns about tightening monetary policy from the Federal Reserve.

Mortgage applications increased 2.3% in the second week of January, led by a 7.9% jump in loans to buy a home, while refinancing applications fell 3.1% to their lowest level in over two years, according to data from the Mortgage Bankers Association.

Housing starts in December were 1.702 million when 1.650  million were expected and building permits were 1.873 million, which compares to the anticipated 1.717 million.

The longer-term fundamentals remain supportive despite the more hawkish Federal Reserve.


The euro currency is higher after Germany’s 10-year bond yield increased above 0% for the first time since May 2019. This boosted expectations for a faster policy tightening by the European Central Bank in 2022. Financial futures markets are pricing in a 10 basis-point rate hike from the ECB in September and a second rate increase by December.

The British pound is higher on news that U.K. inflation surprised with a jump to the highest level in 30 years.

In the longer term, a hawkish Bank of England will likely support the British pound. Financial futures markets have priced in up to four Bank of England interest rate hikes this year.

The Bank of Japan held its policy meeting yesterday and left its key short-term interest rate unchanged at -0.1% and that for 10-year bond yield around 0%.

An accommodative Bank of Japan will likely result in long-term pressure on the yen.


Futures are mostly higher despite the stronger than predicted housing starts report.

Federal Reserve officials remain steadfast in their intentions to hike the fed funds rate three or four times this year.

The next FOMC meeting is scheduled for January 26. Most analysts are predicting the FOMC will keep its fed funds rate unchanged at 0% to .25% at the meeting.

Financial futures markets are predicting the FOMC will hike its fed funds rate at the March 26 policy meeting by 25 basis points.

The Treasury will auction 20-year bonds today.

Some analysts believe that if the rate of growth in the U.S. economy slows, it may be difficult for the Federal Reserve to maintain its recently ramped-up hawkish policy stance.

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