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Fed Chair Powell Less Dovish than Expected

by Archer Financial Services | May 02, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

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.

 

CURRENCY FUTURES

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.

 

INTEREST RATE MARKET FUTURES

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%.

 

SUPPORT AND RESISTANCE

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 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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