By Alan Bush | Senior Financial Economist at ADMIS
U.S. stock index futures declined on Wednesday after Federal Reserve Chairman Powell hinted that a lower fed funds rate may not be forthcoming.
Powell said the recent decline in inflation was unlikely to last, which dampened speculation of policy easing later this year.
Initial jobless claims were 230,000 in the week ended April 27 when analysts expected 215,000 new claims.
The corporate earnings season is turning out to be better than analysts had anticipated. Of the companies that have reported results so far, 75% of them beat earnings estimates, according to FactSet.
In spite of Fed Chair Powell’s comments yesterday, my view remains that the global reflation scenario is on track and easier credit conditions from most of the world’s central banks are coming and will be the dominant fundamental that supports stock index futures in the long term.
The U.S. dollar was supported by Powell’s less dovish than expected press conference yesterday.
The British pound drifted a little lower after the Bank of England voted unanimously to keep its key interest rate unchanged at 0.75%, as expected.
The Canadian dollar and the Australian dollar are lower due to weaker crude oil prices.
Yesterday, the Federal Open Market Committee voted unanimously to maintain its benchmark interest rate in a range of 2.25% and 2.50%.
Fed Chair Powell said he sees "no strong case" for moving rates in either direction and he remains confident that inflation will return to the central bank’s 2% target. In addition, he said the recently low inflationary pressures may only be “transitory.”
Many analysts believe the Federal Reserve is not placing enough importance on the weakening overseas economies and the financial futures markets that, before Powell’s press conference and after his press conference, continue to predict the Fed will lower its fed funds rate in December.
In spite of Powell’s comments yesterday, financial futures are predicting there is a 54% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points, or more at its December 11 policy meeting. Yesterday, before the FOMC statement and the Powell press conference the probability was 66%.
June 19 S&P 500
Support 2913.00 Resistance 2934.00
June 19 U.S. Dollar Index
Support 97.180 Resistance 97.490
June 19 Euro Currency
Support 1.12240 Resistance 1.12710
June 19 Japanese Yen
Support .89840 Resistance .90180
June 19 Canadian Dollar
Support .74260 Resistance .74620
June 19 Australian Dollar
Support .7003 Resistance .7046
June 19 Thirty Year Treasury Bonds
Support 147^4 Resistance 148^0
June 19 Gold
Support 1265.0 Resistance 1283.0
July 19 Copper
Support 2.7500 Resistance 2.8100
June 19 Crude Oil
Support 61.55 Resistance 63.88
For more information about these markets, please contact Alan at 312.242.7911 or via email at email@example.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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