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U.S. Employment Numbers Mostly Better than Expected

by Archer Financial Services | Feb 02, 2018

By Alan Bush | Senior Financial Economist at ADMIS     

STOCK INDEX FUTURES

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. 

 

CURRENCY FUTURES

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.

 

INTEREST RATE MARKET FUTURES

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.

 

SUPPORT AND RESISTANCE

 

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 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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