Index Futures Overperform the News
STOCK INDEX FUTURES
The third quarter gross domestic product increased 2.6% when 2.3% was expected.
Durable goods orders in September increased 0.4% when a gain of 0.7% was anticipated.
Jobless claims in the week ended October 22 were 217,000 when 220,000 were estimated.
The 10:00 central time October Kansas City Federal Reserve manufacturing index is predicted to be 3.0.
The technicals are becoming more supportive.
S&P 500 futures remain higher after the one-day reversal pattern to the upside on October 13.
After falling to its lowest level in the overnight trade since September 21 the U.S. dollar index is higher today.
In recent weeks the greenback has underperformed the news due to increasing prospects that the Federal Reserve will have to slow the pace of interest rate hikes to avoid overtightening.
The European Central Bank today announced a 75 basis point rate hike for a second straight meeting, as expected, bringing the key rate to 1.5%. The decision comes a week before the Federal Reserve is expected to deliver a fourth consecutive increase of that size, bringing the U.S. rate to a range of 3.75% to 4.0%.
In a recent survey a majority of economists said they expect the Bank of England to hike its key interest rate by 75 basis points at the next policy meeting on November 3. There is a minority view that the BoE will increase its main rate by a larger amount.
Yesterday the Bank of Canada unexpectedly slowed its pace of hiking, increasing its benchmark interest rate by only 50 basis points to 3.75% rather than the 75 basis point increase expected by most economists.
The Bank of Japan will hold its policy meeting on October 28. Interest rate policies are likely to remain unchanged.
INTEREST RATE MARKET FUTURES
There are no major Federal Reserve speakers scheduled for today.
The central bank imposes a quiet period starting the second Saturday before a Federal Open Market Committee meeting during which officials refrain from commenting on the economy and monetary policy. The Fed refers to this as a “Blackout Period.”
The Treasury will auction seven-year notes.
According to financial futures markets currently, there is a 90.0% probability that the Federal Open Market Committee will increase its fed funds rate by 75 basis points at the November 2 policy meeting and a 10.0% probability that the rate will be hiked by 50 basis points.
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