S&P 500 Futures Advance and Test Downtrend Line

STOCK INDEX FUTURES

Stock index futures are higher despite the bearish interest rate implications of this morning’s gross domestic report.

Second quarter gross domestic product increased 3.0% when up 2.8% was expected, and personal consumption expenditures were up 2.9% when a gain of 2.3% was anticipated.

Jobless claims in the week ended August 24 were 231,000 when 230 ,000 were forecast.

The 9:00 central time July pending home sales index is estimated to be up 1.1%.

S&P 500 futures remain in a congestion pattern and are also coming up against a four-day downtrend line.

Futures have performed better than the news would suggest in August, which indicates traders are looking beyond recent economic reports to some other not yet obvious bullish fundamental.

CURRENCY FUTURES

The U.S. dollar index firmed when the U.S. gross domestic product report was released. However, it is likely that much of these gains will be given back later today as the Federal Reserve remains on a path toward accommodation.

The euro currency is lower on news that inflation fell in six important German states in August, suggesting Germany’s national inflation rate could decline this month.

The economic sentiment indicator in the euro area improved to 96.6 in August from the upwardly revised 96.0 in July. The median estimate was 95.8.

The Japanese government upgraded its economic assessment for the first time in over a year on indications of improved consumption.

INTEREST RATE MARKET FUTURES

Futures are lower in light of the 7:30 U.S. economic reports.

Raphael Bostic of the Federal Reserve will speak at 2:30 PM

Yesterday Raphael Bostic said we cannot wait until inflation is 2.0% to move away from a restrictive stance, although he also said it would not be a good idea to lower interest rates only to have to increase them again later.

The U.S. Treasury will auction seven-year notes today.

There is a 68% probability that the Federal Open Market Committee will lower its funds rate by 25 basis points at its September 18 meeting, and there is a 32% probability that the FOMC will reduce its key interest rate by 50 basis points in September.

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