Written Commentary
STOCK INDEX FUTURES
S&P 500 and Dow futures advanced to record highs.
Mortgage applications climbed 2.8% in the week ending August 6, after a 1.7% drop in the previous week, data from the Mortgage Bankers Association showed. Applications to refinance a home loan rose 3.2% and purchases increased 1.8%.
The consumer price index in July increased 0.5%, which is down from the 0.9% increase in June and consumer price index excluding food and energy was up 0.3%, which is down from the 0.9% increase last month. The consumer price index was expected to be up 0.5% and the consumer price index excluding food and energy was anticipated to be up 0.4%
At 9:00 central time the Atlanta Federal Reserve will release its business inflation expectations for August. Last month the figure was 2.8%.
The fundamentals and technical aspects remain positive for U.S. stock index futures.
CURRENCY FUTURES
The U.S. dollar index is lower due to the on-balance weaker than predicted consumer price index report.
Longer term, the greenback is likely to be supported by safe-haven flow of funds.
Most foreign currencies are higher today by default in response to the U.S. consumer price index.
Traders expect the European Central Bank will remain dovish for some time, after policymakers promised last month to keep interest rates at record low levels for even longer in an effort to bring inflation back to its 2.0% target.
INTEREST RATE MARKET FUTURES
Futures firmed when the on-balance weaker than estimated consumer price index report was released.
Richmond Federal Reserve Bank President Thomas Barkin said it may take a few months more for the U.S. job market to recover enough that the Federal Reserve can reduce its support for the economy.
Federal Reserve speakers today are Raphael Bostic at 9:30 and Esther George at 11:00.
The Treasury will auction 10-year notes.
The interest rate futures markets have been indicating since May clues about the state of the global economy and inflation with the U.S. Treasury yield curve flattening.
A flattening yield curve suggests a slower rate of global economic growth in the future.
The Federal Reserve Bank of Kansas City is proceeding with plans to host a modified, in-person program for this year’s Economic Policy Symposium in Jackson Hole, Wyoming on August 26-28.
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