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Indexes Decline on Higher Increase in CPI

STOCK INDEX FUTURES 

Stock index futures declined in response to the larger than expected increase in the consumer price index. The consumer price index for January increased 0.6% when up 0.5% was expected, and on an annualized basis the consumer price index advanced 7.5%, which compares to the anticipated 7.3% gain.

Jobless claims in the week ended February 5 were 223,000 when 230,000 were predicted.

S&P 500 futures broke out above downtrend lines earlier in the week and are currently above those break out levels despite today’s price decline.

CURRENCY FUTURES

The U.S dollar is higher in response to the higher than estimated U.S. consumer price index. In the previous weeks the greenback has underperformed the news.

The Japanese yen fell to a five-week low when the Bank of Japan warned investors that it would not let the yield on the 10-year Japanese government bond increase above 0.25% after the market pushed the rate near that level for the first time in six years.

The BoJ said it would buy an unlimited quantity of recently issued 10-year Japanese government bonds at a fixed rate of 0.25% on Monday.

The Japanese yen will likely take out the early January lows.

Interest rate differential expectations suggest the long term trend for the Japanese yen is lower.

INTEREST RATE MARKET FUTURES

Futures are lower in response to the larger than expected U.S. consumer price index, which prompted calls for a more hawkish Federal Reserve.

The Treasury will auction 30-year bonds today.

Cleveland Federal Reserve President Loretta Mester yesterday said she did not see a compelling case for a bigger 50 basis point rate hike in March, although such a move would depend on how persistent inflation will be.

Atlanta Federal Reserve President Raphael Bostic said Wednesday he anticipates hiking interest rates three or four times this year, but he stressed that the central bank isn’t locked into a specific plan.

Thomas Barkin of the Federal Reserve will speak at 6:00 P.M.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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