Likely FOMC Accommodation Underpins Stock Index Futures
Alan Bush of ADM Investor Services - InsideFutures.com - Thu Jul 11, 8:52AM CDT

July 11, 2019

STOCK INDEX FUTURES

U.S. stock futures advanced yesterday after Federal Reserve Chairman Jerome Powell in his testimony to the House Financial Services Committee set the stage for the central bank to lower interest rates.

Fed Chairman Powell said the economic outlook has not improved in recent weeks, and it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.

There was additional support for stock index futures yesterday when the minutes from the Fed's June 19 meeting were released and showed many central bank officials saw a stronger case for a rate cut.

At 9:00 central time Fed ChairmanPowellwill deliver his semiannual monetary policy testimony to the Senate Banking Committee.

The consumer price index increased 0.1% in June from the prior month, which compares to expectations of unchanged and the consumer price index, excluding the volatile food and energy categories, rose 0.3% when an increase of .2% was anticipated.

Jobless claims fell last week to the lowest level since April. Initial jobless claims decreased 13,000 to 209,000 in the week ended July 6. Economists expected 224,000 new claims.

My view remains that the global reflation scenario is on track and easier credit conditions from most of the worlds central banks, including the Federal Reserve, are coming and will be the dominant fundamental that supports stock index futures in the long term.

CURRENCY FUTURES

The U.S. dollar index fell yesterday after Fed Chairman Powells dovish testimony and there is follow-through weakness today.

Interest rate differential expectations have turned slightly bearish for the greenback in light of Fed Chair Powells dovish congressional testimony.

The euro currency is higher even though the minutes of the European Central Banks monetary policy meeting of the governing council held on June 5 and 6 indicated the central bank will consider injecting new stimulus into the euro zone economy as a result of weak inflation data and increasing global uncertainties.

INTEREST RATE MARKET FUTURES

In addition to Fed Chair Powell, other Federal Reserve speakers today are New York Federal Reserve Bank PresidentJohn Williams at 10:00 and at 12:30, Federal Board of Governors Vice Chairman for SupervisionRandal Quarles at 12:30 and Minneapolis Federal Reserve Bank PresidentNeel Kashkari at 4:00.

The Treasury will auction 30 year bonds.

Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its July 30-31 policy meeting. A second rate cut is anticipated by financial futures markets later this year.

In the longer term, higher prices are likely for futures, as most major central banks are likely to embark on a new round of accommodation.

SUPPORT AND RESISTANCE

September 19S&P 500

Support 2991.00 Resistance 3010.00

September 19 U.S. Dollar Index

Support 96.340 Resistance 96.740

September 19Euro Currency

Support 1.13060 Resistance 1.13520

September 19Japanese Yen

Support .92600 Resistance .93250

September 19Canadian Dollar

Support .76480 Resistance .76850

September 19Australian Dollar

Support .6960 Resistance .7012

September 19 Thirty Year Treasury Bonds

Support 154^0 Resistance 155^10

August 19Gold

Support 1411.0 Resistance 1433.0

September 19Copper

Support 2.6800 Resistance 2.7000

August 19 Crude Oil

Support 60.24 Resistance 61.03

Contact Alan for more extensive information on these markets at 312.242.7911 or via email at alan.bush@admis.com. Thank you.


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