Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower as traders focus on a more hawkish Federal Reserve.
Federal Reserve Chair Jerome Powell said today the Fed hasn’t made any decisions on issuing a digital dollar, after yesterday his comments included a more aggressive schedule of interest rate hikes this year.
Mortgage applications in the U.S. plunged 8.1% in the week ended March 18, following a 1.2% decline in the previous week, as mortgage rates surged to the highest level in three years. Applications to refinance a home loan fell 14.4%, while those to purchase a home were down 1.5%.
The 9:00 central time February new home sales report is expected to show 810,000.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index is higher as investors adjust their expectations for interest rate hikes following hawkish comments from several Fed policymakers. Traders are factoring in the greater possibility of a 50-basis point hike in May after Fed Chair Powell, during a speech before the National Association for Business Economics, opened the door for a more aggressive move to reduce inflation, which is now running at a 40-year high.
The annual inflation rate in the U.K. increased to 6.2% in February of 2022 from 5.5% in January and above market estimates of 5.9%. This is the highest inflation rate since March of 1992.
Manufacturing sales in Canada increased 0.9% from a month earlier in February of 2022, slowing sharply from a 4.2% increase in the prior month.
The Japanese yen fell to a new 6-year low before a recovery.
Interest rate differential expectations suggest the Japanese yen will trend lower.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures declined to the lowest level since May 2019 before a recovery.
Mary Daly of the Federal Reserve will speak at 10:45.
The Treasury will auction 20-year bonds today.
The part of the yield curve that measures the change between two-year and 10-year yields is flattening, which is a sign that traders worry that Fed tightening will hurt the economy.
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