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Stock Index Futures Likely to Recover Later Today

by Archer Financial Services | Feb 01, 2018

By Alan Bush | Senior Financial Economist at ADMIS     
 

STOCK INDEX FUTURES 

Stock index futures are lower after the Federal Open Market Committee yesterday kept rates unchanged, while the statement had a more hawkish tone than some analysts expected.

Initial claims for state unemployment benefits fell 1,000 to a seasonally adjusted 230,000 for the week ended January 27. Economists had forecast claims rising to 238,000 in the latest week.

The 8:45 central time January PMI manufacturing index is expected to be 55.5.

The 9:00 January ISM manufacturing index is expected to be 58.6 and the 9:00 December construction spending report is anticipated to show a .5% increase.

Now that Asian and European traders have had a chance to react to yesterday’s slightly hawkish FOMC statement, I expect futures will at least partially recover later today.

The main trend for stock index futures is higher. 

 

CURRENCY FUTURES

The U.S. dollar suffered its worst month in 18 months in January. The greenback is a little weaker today in spite of the hawkish tone to the FOMC statement, which should be viewed as a sign of weakness.

The main trend for the U.S. dollar is lower.

The euro currency is higher, as speculation grows that the European Central Bank will remove some of its accommodation later this year. In fact, some analysts are expecting an interest rate hike from the ECB in the first quarter of 2019.

The British pound advanced on news that U.K. house prices surged in January. Values increased .6% from December, taking the annual gain to 3.2%, which compares to the December rate of 2.6%.

 

INTEREST RATE MARKET FUTURES

Thirty year Treasury bond futures are lower and are hovering just above 10 month lows.

Yesterday the Federal Open Market Committee voted to keep its benchmark interest rate unchanged at a range of between 1.25% and 1.50%, as expected.

The Fed said it expects the economy to expand at a moderate pace and the labor market to remain strong in 2018.

The FOMC anticipated inflation will rise this year, which is an indication that it is still on track to raise borrowing costs at its March 21 meeting.

The Fed also said it unanimously selected Powell to succeed Yellen, effective February 3. Powell, who was nominated by President Donald Trump and confirmed by the U.S. Senate, is not expected to dramatically change the policies of Yellen.

The probability of a fed funds rate increase at the FOMC’s March 21 policy meeting is 77%, which compares to 76% yesterday. 

In the longer term outlook, futures are likely to work lower, as it is likely that commodity and wage inflation will accelerate this year and be above the consensus estimates.

This will adversely impact the 30 year Treasury bond futures the most, since the long end of the curve is the most susceptible to the inflation influence.

 

SUPPORT AND RESISTANCE 

March 18   S&P 500

Support    2807.00       Resistance    2839.00

 

March 18   U.S. Dollar Index

Support    88.510         Resistance    89.210

 

March 18   Euro Currency

Support    1.24100       Resistance    1.25110

 

March 18   Japanese Yen

Support    .91230         Resistance    .92000

 

March 18   Canadian Dollar

Support    .81050         Resistance    .81490

 

March 18  Australian Dollar

Support    .7977           Resistance    .8077

  

March 18   Thirty Year Treasury Bonds

Support    147^4          Resistance    148^6

 

April 18   Gold

Support    1337.0         Resistance    1354.0

 

March 18   Copper

Support    3.1800         Resistance    3.2250

 

March 18   Crude Oil

Support    64.43           Resistance    65.79

For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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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 risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. 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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