US GDP Weaker Than Expected
STOCK INDEX FUTURES
Stock index futures are higher today and remain near record highs in response to stronger than expected third quarter corporate earnings reports and despite ongoing supply chain challenges and elevated inflationary pressures.
Futures are higher even though the third quarter gross domestic product increased only 2.0% when an increase of 2.7% was expected. This is well below market forecasts of 2.7% growth, and is substantially down from 6.7% growth in the second quarter.
Jobless claims in the week ended October 23 were 281,000 when 290,000 were anticipated.
The 9:00 central time September pending home sales report is predicted to show a 1.7% increase.
The October Kansas City Federal Reserve manufacturing index will be released at 10:00. Last month the report showed the index at 22.
The longer-term fundamental and technical aspects remain supportive for stock index futures.
U.S. dollar index futures declined as a result of the weak U.S. gross domestic product report. However, some recovery is likely later today since interest rate differential expectations remain supportive to the greenback. Higher prices are likely at least up until the November 3 Federal Open Market Committee policy meeting.
The European Central Bank kept its key interest rate at record low levels and reaffirmed its forward guidance for interest rates and stimulus. Policymakers indicated that interest rates will not increase until projections show inflation is sustainably at 2.0%.
The Bank of Canada ended its QE program on Wednesday and joined the Reserve Bank of New Zealand in normalizing monetary policy. The Bank of Canada kept its benchmark interest rate steady at 25 basis points.
The Bank of Japan kept policies unchanged, but indicated dovishness by lowering inflation and growth forecasts.
Next week the Reserve Bank of Australia meets on Tuesday, the U.S. Federal Reserve on Wednesday, and the Bank of England on Thursday.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures are lower despite the weak U.S. gross domestic product report.
The Treasury will auction seven-year notes today.
There are no Federal Reserve speakers today due to the communications blackout period ahead of the November 2-3 FOMC policy meeting.
In advance of the upcoming FOMC meeting, the dominant fundamentals for the 30-year Treasury bond futures are offsetting. There is the bullish influence of a slowing rate of growth in the global economy, which is being offset by the bearish influence of the anticipated tapering of the Fed’s $120 billion a month in asset purchases.
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