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U.S. Stock Index Futures Overperforming the News on the Upside

by Archer Financial Services | Jul 19, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Yesterday’s gains were linked to comments from New York Federal Reserve Bank President John Williams when he suggested the Federal Reserve should be more aggressive in its monetary policies in an effort to prevent a slowdown in the U.S. economy. That caused some analysts to believe the Fed could reduce its fed funds rate by 50 basis points at its July 31 policy meeting.

Today, however, the Federal Reserve tried to “walk back” Williams’ comments when St. Louis Fed President James Bullard said a 25 basis point rate cut in the near term would be appropriate.

The 9:00 central time July consumer sentiment index is expected to be 98.6.

My view remains that the global reflation scenario is on track and easier credit conditions from most of the world’s central banks, including the Federal Reserve, are coming and will be the dominant fundamental that supports stock index futures in the long term.

CURRENCY FUTURES

The U.S dollar fell hard yesterday on talk of a 50 basis point reduction in the fed funds at the upcoming Federal Open Market Committee meeting. However, the greenback is higher today on the apparent “walk back” from those comments from St. Louis Fed President James Bullard.

In spite of today’s gains, interest rate differential expectations remain slightly bearish for the U.S. dollar.

The euro currency fell, as investors ramped up expectations for a European Central Bank interest rate cut as early as at its next meeting on July 25. Money markets are now pricing in approximately a 60% chance of a 10 basis point rate cut next week.

The Japanese yen is lower after a report showed Japan’s core inflation rate increased by the slowest pace in two years, which prompted bets of new accommodation coming from the Bank of Japan.

The Canadian dollar declined when a report showed Canadian retail sales dropped 0.1% on a monthly basis in May when compared to the market expectation of a 0.3% gain.

INTEREST RATE MARKET FUTURES

Futures rallied yesterday on New York Federal Reserve Bank President John Williams’ bullish comments, but are only slightly lower today after St. Louis Fed President James Bullard’s “walk back” comments today.

Federal Reserve speakers today are St. Louis Federal Reserve Bank President James Bullard at 10:05 and Boston Federal Reserve Bank President Eric Rosengren at 3:30.

Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its July 30-31 policy meeting. A second and possibly a third rate cut is anticipated by financial futures markets later this year.

In the longer term, higher prices are likely for futures, as most major central banks are likely to embark on a new round of easier credit conditions.

SUPPORT AND RESISTANCE

September 19 S&P 500

Support    2993.00      Resistance    3014.00

September 19 U.S. Dollar Index

Support    96.370        Resistance    96.900

September 19 Euro Currency

Support    1.12600      Resistance    1.13430

September 19 Japanese Yen

Support    .93070        Resistance    .93730

September 19 Canadian Dollar

Support    .76290        Resistance    .76950

September 19 Australian Dollar

Support    .7054          Resistance    .7100

September 19 Thirty Year Treasury Bonds

Support    154^12       Resistance     155^8

August 19 Gold

Support    1430.0        Resistance     1456.0

September 19 Copper

Support    2.7100        Resistance     2.8100

September 19 Crude Oil

Support    55.31          Resistance     56.75



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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