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U.S. GDP Better than Expected

by Archer Financial Services | Feb 28, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures declined as the Trump-Kim summit ended without progress and the India-Pakistan tensions remain.

On an upbeat note, U.S. Trade Representative Lighthizer told a congressional committee yesterday that the U.S. and China are moving closer to a trade agreement and that any new U.S. tariffs on China would be delayed from the March 1 timetable.

There was limited market reaction on news that the U.S. fourth quarter gross domestic product increased at a 2.6% at an annual rate. Economists expected a 2.2% reading.

Initial weekly U.S. jobless claims increased 8,000 to 225,000 in the week ended February 23, which compares to consensus expectations for initial claims to be 220,000. 

The 8:45 central time February Chicago PMI is expect to be 56.1.

The February Kansas City Federal Reserve manufacturing index will be released at 10:00. Last month the index was 5.

Stock index futures have been performing better than the news would suggest since the lows were made in late December, which should be viewed as a sign of long term strength.

I would not be surprised to see a recovery from the current lower levels to higher on the day.

 

CURRENCY FUTURES

The U.S. dollar fell to a new three week low in the overnight trade. The greenback remains lower in spite of the bullish increase in the U.S. gross domestic product report.

The euro currency firmed on news that German inflation edged up in February. Consumer prices rose 0.5% on the month and by 1.6% on the year. Economists forecast a gain of 0.5% on the month and a rise of 1.5% on the year.

The Canadian dollar fell on news that Canadian producer prices unexpectedly fell 0.3% in January. Market expectations were for the producer price index to climb 0.1%.

The Australian dollar is holding up well in spite of news that China’s February factory activity declined to three year low, while export orders were the worst in a decade.

Longer term, the Canadian dollar and the Australian dollar, the “commodity currencies,” will probably trend higher, as prices for most industrial commodities are likely to advance.

 

INTEREST RATE MARKET FUTURES

Federal Reserve Vice Chair Richard Clarida said the central bank should be patient and data dependent in its approach to monetary policy.

Federal Reserve speakers today are Philadelphia Federal Reserve Bank President Patrick Harker at 11:15 and Dallas Federal Reserve Bank President Robert Kaplan at 12:00.

Financial futures markets are predicting an 85% probability that the fed funds rate will remain unchanged at the current level of 2.25%-2.50% this year. There is a 2% chance for a 25 basis point increase in 2019 and there is a 13% probability of a 25 basis point reduction this year.

The thirty year Treasury bond futures have remained in a broad trading range since the first week in January. A U.S.-China trade agreement, or strong hint of one, would be a catalyst to take futures lower.

I will be out of the office on Friday, March 1.

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2780.00      Resistance    2798.00

 

March 19 U.S. Dollar Index

Support    95.660        Resistance    96.110

 

March 19 Euro Currency

Support    1.13770      Resistance    1.14440

 

March 19 Japanese Yen

Support    .90010        Resistance    .90550

 

March 19 Canadian Dollar

Support    .75710        Resistance    .76200

 

March 19 Australian Dollar

Support    .7114          Resistance    .7178

 

March 19 Thirty Year Treasury Bonds

Support    145^0         Resistance    146^4

 

April 19 Gold

Support    1315.0        Resistance    1331.0

 

May 19 Copper

Support    2.9300        Resistance    2.9800

 

April 19 Crude Oil

Support    56.21          Resistance    57.43


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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