Empire State Manufacturing Index Plunges
STOCK INDEX FUTURES
Stock index futures are lower as various central banks pushed back against expectations of aggressive interest rate cuts this year.
The January Empire State manufacturing index was -43.7 when -4.7 was expected. The new orders index was -49.4, which compares to -11.3 in December.
The fundamentals and technicals remain supportive to stock index futures longer term despite recent talk of a potentially less dovish Federal Reserve this year.
The U.S. dollar index advanced, and much of the strength appears to be technical as futures gapped above a downtrend line. This gap higher on the daily chart will probably be filled later this week.
The euro currency is lower despite European Central Bank hawks Joachim Nagel and Robert Holzmann indicating that it is too early to discuss interest rate cuts, while other ECB officials, thought to be doves, including Philip Lane and Constantinos Herodotou, suggested current market expectations for rate cuts were too optimistic.
The ZEW Indicator of Economic Sentiment for Germany improved by another 2.4 points to +15.2 in January 2024, surpassing market predictions of +12.
The British pound declined after data showed pay growth eased more than estimated increasing the probability that the Bank of England will implement interest rate cuts as early as May.
INTEREST RATE MARKET FUTURES
Futures are lower as the yield on the U.S. 10-year Treasury note pushed back over 4.00%.
Futures firmed only slightly when the very weak January Empire State manufacturing index was reported.
Christopher Waller of the Federal Reserve will speak at 11:00 central time.
Financial futures markets are predicting there is a 5.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points and the January 31 policy meeting, and there is a 95.0% probability that the Fed will keep rates unchanged.
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