CPI Increases More Than Expected
STOCK INDEX FUTURES
Recent strength in stock index futures is primarily due to prospects of a less hawkish Federal Reserve.
The September consumer price index report showed a 0.4% increase when up 0.3% was expected and, the consumer price index excluding food and energy, advanced 0.3% as anticipated.
Jobless claims in the week ended October 7 were 209,000 as predicted.
The fundamental and technical factors are becoming more friendly to the bulls.
In the last two weeks the U.S. dollar has underperformed the news.
A safe-haven flow of funds has only marginally supported the U.S. dollar as prospects of a less hawkish Federal Reserve have undermined the greenback.
The U.K. economy grew by 0.2% month-over-month in August 2023, matching market estimates, after a revised 0.6% contraction in July.
Manufacturing output in the U.K. declined 0.8% month-on-month in August 2023, which is more than market expectations of a 0.4% fall but slowing from an upwardly revised 1.2% drop in July.
Japan’s core machinery orders fell for a second consecutive month in August. Orders declined 0.5% in August from the previous month. The median forecast was 0.4% growth. Core machinery orders are regarded as a barometer of capital expenditures in the coming six to nine months.
INTEREST RATE MARKET FUTURES
The Treasury will auction 30-year bonds.
Federal Reserve speakers today are Raphael Bostic at 12:00 and Susan Collins at 3:00.
The minutes from the September 20 Federal Open Market Committee meeting, which were released yesterday, had a hawkish tone. A majority of Fed officials indicated one more rate increase would likely be appropriate.
However, that was then, and this is now.
Recent dovish comments from Federal Reserve officials reduced expectations of another interest rate hike this year.
Financial futures markets are now predicting there is a 92% probability that the Federal Open Market Committee will keep its fed funds rate unchanged and an 8% probability of a 25 basis point increase at its November 1 policy meeting.
The Federal Reserve’s target range for the fed funds rate currently is 5.25% to 5.50%.
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