Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher as traders focus on the weaker than expected hourly earnings portion of this morning’s employment report.
Hourly earnings increased 0.3% when up 0.4% was predicted.
Nonfarm payrolls increased 223,000 when up 200,000 was expected. The unemployment rate was 3.5% when 3.7% was anticipated.
The 9:00 central time November factory orders report is expected to show a 0.7% decline and the 9:00 December Institute for Supply Management services index is anticipated to be 55.0.
CURRENCY FUTURES
The U.S. dollar index was higher in the overnight trade but gave back all of the gains when the U.S. employment report was released.
Interest rate differential expectations, which have been bearish for the U.S. dollar since late September are now just neutral.
Euro zone inflation eased by more than expected in December. Consumer prices Increased 9.2% on the year in December, easing from a 10.1% increase in November and are at the lowest level since August. Economists expected a 9.7% inflation rate.
A lower inflation rate in the euro zone puts pressure on the European Central Bank to be less hawkish.
INTEREST RATE MARKET FUTURES
Futures are higher in response to the smaller than predicted increase in hourly earnings.
Federal Reserve speakers today are Raphael Bostic at 10:15, Lisa Cook at 10:15, Thomas Barkin at 11:15 and Raphael Bostic at 2:30.
According to financial futures markets currently, there is a 73.0% probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points at the February 1 policy meeting and a 27.0% probability that the rate will be hiked by 50 basis points.
Higher prices are likely for futures across the yield curve.
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