Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are higher.
Mortgage applications fell 1.1% in the week ending September 24, following a 4.9% increase in the previous period, according to data from the Mortgage Bankers Association. Applications to purchase a home dropped 1.0%, and applications to refinance a home also declined 1.0%.
The 10:00 central time August pending home sales index is expected to be up 0.9%.
At 10:45 Federal Reserve Chair Jerome Powell will speak at the European Central Bank Forum.
The bears on this market point to the near-term prospects of central banks pulling back stimulus, concerns about the pace of the global economic recovery and the ongoing debates over the debt limit in Washington.
On the bullish side is the historically low fed funds rate of zero to 25 basis points.
Despite the recent pressure, the longer-term fundamental and technical aspects remain supportive for stock index futures.
CURRENCY FUTURES
The U.S. dollar index advanced for a third day to its highest level since November 2020, as higher U.S. Treasury yields made the dollar more attractive to investors.
U.S. Treasury yields have increased since the end of last week, after the Federal Reserve said it will likely begin reducing its monthly bond purchases as early as November.
The euro currency is lower despite news that an economic sentiment indicator in the euro area edged up to 117.8 in September 2021 compared to 117.6 in August. The latest reading came in above market expectations of 116.9.
Import prices in Germany increased 16.5% year-on-year in August of 2021, which is a new high since September of 1981, and above the market consensus of a 16.1% increase.
Industrial prices in Canada fell 0.3% in August from July.
INTEREST RATE MARKET FUTURES
Futures at the long end of the curve are higher.
Federal Reserve Chair Jerome Powell last week said the U.S. central bank could begin scaling back asset purchases in November and start increasing interest rates as soon as next year.
Other Federal Reserve speakers today are Patrick Harker at 8:00, Mary Daly at 12:00, Raphael Bostic at 1:00 and John Williams at 4:00.
Traders continue to weigh prospects that the Fed will soon taper its $120 billion a month in asset purchases.
I believe a tapering will be later rather than sooner, and when it is implemented it will be a dovish tapering with any reduction being small.
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