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Normalizing Yield Curve Offers a Glimmer of Hope

by Archer Financial Services | Mar 17, 2020

By Alan Bush | Senior Financial Economist at ADMIS   

 

STOCK INDEX FUTURES

U.S. stock index futures are higher, but well off of the highs made in the overnight trade.   
Retail sales in February fell 0.5% when an increase of 0.2% was expected and retail sales, excluding autos, fell 0.4%, which compare to the anticipated 0.2% advance.
February industrial production increased 0.6% when up 0.4% was estimated and capacity utilization was 77%, as expected.
The 9:00 central time business inventories report is expected to show a 0.1% decline.
The 9:00 central time March housing market index is anticipated to be 74 and the 9:00 January Job Openings and Labor Turnover Survey is anticipated to be 6.4 million. The Labor Department's JOLTS report tracks monthly changes in job openings and offers rates on hiring and quits.
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 index is sharply higher on the belief that the U.S. economy will hold up better than elsewhere in the world.
The euro currency is lower on news that economic expectations dropped sharply in March due to the coronavirus pandemic, according to the ZEW economic research institute. The measure of economic expectations in the euro zone fell into negative territory, falling to minus 49.5 points in March from 10.4 in February. This is a decrease of 59.9 points.
German economic expectations plunged by 58.2 points, which is the largest drop since the ZEW survey began in 1991.
The Japanese yen is lower after Bank of Japan Governor Kuroda said the central bank will consider additional stimulus measures, if the economy worsens further.
 

INTEREST RATE MARKET FUTURES

Flight to quality longs were liquidated, as stock index futures staged a limited rally.
The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, said the central bank still has “very powerful” emergency lending authorities left in its arsenal to protect the economy against the fallout from the coronavirus. Kashkari said, “Nothing is completely off the table.”
Shifts in the yield curve have been encouraging recently. After being severely inverted a few weeks ago, the yield curve is flattish in the near term now and is becoming more normal further out. This is an indication that the market is anticipating a recovering economy once the negative impact of the coronavirus subsides.
 

SUPPORT AND RESISTANCE

June 20 S&P 500
Support    2366.00      Resistance    2503.00
June 20 U.S. Dollar Index
Support    98.050        Resistance    99.750
June 20 Euro Currency
Support    1.10240      Resistance    1.12500
June 20 Japanese Yen
Support    .93650        Resistance    .95200
June 20 Canadian Dollar
Support    .70600        Resistance    .71770
June 20 Australian Dollar
Support    .5975          Resistance    .6154
June 20 Thirty Year Treasury Bonds
Support    178^0         Resistance     181^24
April 20 Gold
Support    1462.0        Resistance     1527.0
May 20 Crude Oil
Support    28.55          Resistance     32.00
May 20 Copper
Support    2.3350       Resistance     2.4250

 



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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