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Fiscal Stimulus Hopes Lift Stock Index Futures

by Archer Financial Services | Mar 10, 2020

By Alan Bush | Senior Financial Economist at ADMIS   

 

STOCK INDEX FUTURES

Stock index futures are sharply higher after President Donald Trump late yesterday announced that a "major" stimulus plan is in the works, including a payroll tax cut and other stimulus measures to limit the economic damage from the coronavirus.

In addition to the potential payroll tax cut, President Trump also said wage relief for hourly workers is under discussion.

President Trump said he would announce more details today.

The National Federation of Independent Business February small business optimism index was 104.5 when 103.7 was expected.

While traders focus on the negative bearish influence of the coronavirus, and rightly so, it will be the bullish impact of substantially easier credit from the world’s central banks that will dominate in the long term.

CURRENCY FUTURES

The U.S. dollar appreciated against its major counterparts due to rising hopes for economic stimulus from the Trump administration and a recovery in Treasury yields.

The euro currency is lower after a report showed the euro zone economy slowed in the fourth quarter.

The gross domestic product in the euro zone increased just 0.1% percent in the October -December period, which was in line with its flash estimate published last month.

The Canadian dollar and the Australian dollar are lower in spite of strong recovery gains in crude oil prices.

INTEREST RATE MARKET FUTURES

U.S. Treasury yields surged, as equity markets rallied and on fiscal stimulus hopes.

The Treasury will auction three-year notes today.

Based on financial futures markets, there is virtually a 35% probability of a 50 basis point cut in the fed funds rate to 50 to 75 basis points and a 65% probability of a 75 basis point cut to 25 to 50 basis points at the March 18 Federal Open Market Committee meeting.

GOLD FUTURES

Gold is still a safe-haven asset in times of economic turmoil, as is the case now with the coronavirus very much adversely affecting the global economy. In addition, there is the accommodative central bank interest rate policies, aggressive buying of gold by central banks and gold’s newly found status of having a “positive yield” when compared to negative yielding assets.

The most important fundamentals we have today are the tailwinds that are likely capable of sustaining a long-term bull market in gold futures. The flow of funds into gold may just be getting started.

The price of gold has already advanced 11% this year and could be on its way to testing its record high of just under $1918 that was set in 2011.

SUPPORT AND RESISTANCE

March 20 S&P 500

Support    2693.00      Resistance    2881.00

June 20 U.S. Dollar Index

Support    95.020        Resistance    95.950

June 20 Euro Currency

Support    1.13700      Resistance    1.15450

June 20 Japanese Yen

Support    .95320        Resistance    .98400

June 20 Canadian Dollar

Support    .72900        Resistance    .73530

June 20 Australian Dollar

Support    .6333          Resistance    .6612

June March 20 Thirty Year Treasury Bonds

Support    179^20       Resistance     186^16

April 20 Gold

Support    1647.0        Resistance     1682.0

April 20 Crude Oil

Support    30.10           Resistance     34.85

May 20 Copper

Support    2.4800        Resistance     2.5700



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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