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Financials Declined on Hawkish Fed Comments


U.S. stock index futures declined yesterday after the minutes of the December 14-15 Federal Open Market Committee meeting were released. The Federal Reserve discussed a faster timetable for raising interest rates this year, potentially as early as in March.

The Fed could more quickly scale back its asset purchases. The program is now on track to end in March instead of June.

Some officials believed the Fed should start shrinking its $8.76 trillion portfolio of bonds and other assets relatively soon after beginning to hike rates.

Analysts were not expecting the Fed to already be talking about letting the balance sheet run off, even as soon as the first rate hike.

Job cuts announced by U.S.-based companies increased 28.1% month-to-month to 19,052 in December of 2021, from 14,875 in November according to Challenger, Gray & Christmas, Inc.

Jobless claims in the week ended January 1 were 207,000 when 205,000 were expected.

The 9:00 central time November factory orders report is anticipated to show a 1.3% increase.

The 9:00 December Institute for Supply Management  services index is estimated to be 67.0.

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


The U.S. dollar index and the euro currency remain in broad sideways patterns, and with interest rate differential expectations offering no clear advantage to either currency, the sideways trade will likely continue for the U.S. dollar and the euro currency over the near term.

Factory orders in Germany jumped 3.7% month-to-month in November of 2021, rebounding from a downwardly revised 5.8% decline in October and beating market forecasts of a 2.1% increase.

Producer prices in the euro area increased 1.8% from a month earlier in November 2021, easing from a 5.4% advance in October, but beating market expectations of a 1.2% gain.

A hawkish Bank of England will likely continue to support the British pound. The Bank of England surprised traders in December by hiking interest rates from record low levels. In addition, markets have priced in up to four Bank of England interest rate hikes in 2022.

An accommodative Bank of Japan will likely result in continuing pressure on the yen.


The interest rate market futures came under pressure yesterday when the minutes from the December FOMC meeting were released.

Some analysts are pointing out that the FOMC is tightening credit conditions at a time when the rate of growth in the economy may be slowing, citing the flattening yield curve since March 2021.

Also, several large investment banks have reduced their estimates of GDP growth.

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