Written Commentary
STOCK INDEX FUTURES
Stock index futures declined yesterday due to weak economic reports, including jobless claims, which increased to 249,000 to the highest level in almost one year. In addition, pressure was linked to disappointing corporate earnings reports, which added to concerns about a slowing economy.
Futures are sharply lower again today in light of the weakening employment situation. Nonfarm payrolls in July increased only 114,000 when up 180,000 were expected, and the unemployment rate increased to 4.3%, which compares to the anticipated 4.1%.
Private payrolls were up 97,000 when a gain of 155,000 was estimated. Average hourly earnings on a month-to-month basis were up 0.2% when a gain of 0.3% was estimated, and the average workweek declined to 34.2 hours when 34.3 hours were expected.
The 9:00 central time June factory orders report is predicted to show a 3.0% decline.
Coming easier credit policies from the Federal Reserve will eventually rescue stock index futures.
CURRENCY FUTURES
The U.S. dollar index is lower due to mounting concerns about an economic slowdown in the U.S., which could prompt the Federal Reserve to pivot more quickly to an accommodative monetary stance.
Today’s weak employment numbers pressured the greenback for a second day.
Longer term, the U.S. dollar is likely to trend lower due to prospects of a more aggressively accommodative Federal Reserve.
The Reserve Bank of Australia will hold its monetary policy committee meeting on August 6 and is expected to keep its cash rates steady at 4.35%.
INTEREST RATE MARKET FUTURES
Futures extended yesterday’s gains after today’s very weak U.S. employment report.
Futures across the board advanced to new highs for the move today.
In light of today’s employment report, there has been a dramatic shift in the outlook for Federal Reserve policy. There is now a 65% probability that the Federal Open Market Committee will lower its fed funds rate by 50 basis points at its September 18 meeting, and there is a 35% chance that the FOMC will reduce its fed funds rate by 25 basis points at the September meeting.
Higher prices are likely for futures.
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