CPI Higher Than Expected
STOCK INDEX FUTURES
U.S. stock index futures were higher in response to stronger than expected third quarter corporate earnings. However, prices set back when the larger than expected increase in the consumer price index was reported.
The September consumer price index was up 0.4% when an increase of 0.3% was anticipated.
Mortgage applications edged up 0.2% in the week ending October 8, rebounding from a 6.9% decline in the previous week, according to data from the Mortgage Bankers Association. Applications to purchase a home were up 1.5%, while those to refinance a home loan declined 0.5%.
The Atlanta Federal Reserve business inflation expectations report for October will be released at 9:00 central time. Last month the figure was 3.1%.
The minutes from the September Federal Open Market Committee meeting will be released at 1:00, providing investors with more insight into policymakers’ views.
The bears on this market point to prospects of central banks pulling back stimulus, recent gains in crude oil prices, concerns about the pace of the global economic recovery and the ongoing debates over the debt limit in Washington.
On the bullish side is the historically low fed funds rate of zero to 25 basis points.
The longer-term fundamental and technical aspects remain supportive for stock index futures.
The U.S. dollar index remains near a one-year high, as firming U.S. Treasury yields make the dollar more attractive to investors. There is a consensus view that the Federal Reserve will announce a tapering of its $120 billion a month in its asset-purchase program at its November policy meeting.
Interest rate differential expectations remain supportive to the greenback, and higher prices are likely at least up until the November 3 Federal Open Market Committee policy meeting.
Industrial output in the euro zone declined 1.6% from a month earlier in August 2021, following a revised 1.4% growth in July and matching market expectations.
U.K. GDP expanded by 2.9% in the three months to August, compared with market expectations of 3.0%.
INTEREST RATE MARKET FUTURES
Federal Reserve official Raphael Bostic said Tuesday that there was a risk of inflation being more persistent than anticipated and that he was on board with an imminent pullback in some stimulus measures.
Federal Reserve speakers today are Lael Brainard at 2:30 and Michelle Bowman at 7:00 this evening.
The Treasury will auction 30-year bonds.
The next leg up for the 30-year Treasury bond futures will likely be after next Federal Open Market Committee meeting on November 3, in a “sell the rumor, buy the fact,” situation. The anticipated bearish news of tapering details may be released at that meeting.
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