By Alan Bush | Senior Financial Economist at ADMIS
Stock index futures are lower due to the political turmoil in Washington and rising interest rates.
There was some recovery when the bullish on balance U.S. employment numbers were released. Nonfarm payrolls rose a seasonally adjusted 200,000 in January, which compares to expectations of up 177,000.
The unemployment rate held steady at 4.1%, as anticipated, which is the lowest level since December 2000.
Wage growth accelerated with average hourly earnings for private sector workers climbing .34% on the month, when a gain of .2% as estimated. This is the largest increase in wages since 2009.
The 9:00 central time January consumer sentiment index is expected to be 95 and the 9:00 December factory orders report is anticipated to show a 1.5% increase.
This is not the beginning of any new bear market.
The main trend for stock index futures is higher.
The U.S. dollar index advanced when the stronger than expected employment numbers were released. The greenback has recently shown a tendency to underperform on bullish news, which is a sign of weakness. I think that will be the case again today.
The main trend for the U.S. dollar is lower.
Although the euro currency is lower now, the currency of the euro zone is likely to be supported due to speculation that the European Central Bank will remove some of its accommodation later this year.
Some analysts are predicting an interest rate hike from the ECB in the first quarter of 2019.
The British pound is lower in spite of news that U.K. 10 year bond yields climbed to the highest level since the nation voted to leave the European Union. This is causing increased expectations that the Bank of England will raise interest rates sooner than anticipated.
Money markets are pricing in a 50% probability of a rate hike by the BoE in May, which compares with a 39% chance a month ago.
Thirty year Treasury bond futures are lower in response to the mostly stronger employment numbers and have fallen to the lowest levels since April 2015.
Federal Reserve speakers today are Dallas Federal Reserve Bank President Robert Kaplan at 12:30 and San Francisco Federal Reserve Bank President John Williams at 2:30.
The probability of a fed funds rate increase at the FOMC’s March 21 policy meeting is 83%, which compares to 77% 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.
March 18 S&P 500
Support 2795.00 Resistance 2834.00
March 18 U.S. Dollar Index
Support 88.390 Resistance 89.190
March 18 Euro Currency
Support 1.24550 Resistance 1.25600
March 18 Japanese Yen
Support .90660 Resistance .91880
March 18 Canadian Dollar
Support .80730 Resistance .81770
March 18 Australian Dollar
Support .7931 Resistance .8057
March 18 Thirty Year Treasury Bonds
Support 145^0 Resistance 146^16
April 18 Gold
Support 1334.0 Resistance 1354.0
March 18 Copper
Support 3.1900 Resistance 3.2450
March 18 Crude Oil
Support 65.03 Resistance 66.55
For more information about these markets, please contact Alan at 312.242.7911 or via email at firstname.lastname@example.org. 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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