US Economic Reports Better Than Expected

STOCK INDEX FUTURES

U.S. stock index futures are higher for a second day due to the recent mostly stronger than expected U.S. economic reports.

In addition, there is increased confidence that U.S. policymakers will come up with a compromise stimulus deal.

Jobless claims in the week ended September 26 were 837,000 when 850,000 were expected.

August personal income fell 2.7% when down 2.5% was anticipated.

The 8:45 central time September PMI manufacturing final index is predicted to be 53.5.

The 9:00 September Institute for Supply Management manufacturing composite index is estimated to be 56.3 and the 9:00 August construction spending report is expected to be up 0.7%.

S&P 500, Dow and NASDAQ futures remain above downtrend lines that started in early September.

CURRENCY FUTURES

The U.S. dollar index extended losses for the fourth straight session and are at a one-week low due to recent robust U.S. economic data and hopes for U.S. fiscal stimulus, which led investors to riskier currencies.

The British pound is higher after it was reported that negotiations on a Brexit free trade deal were making progress, and that officials in London were becoming increasingly optimistic that an agreement could be reached.

INTEREST RATE MARKET FUTURES

The 30 year Treasury bond futures are lower for a second day as most U.S. economic reports recently have come in stronger than anticipated.

Federal Reserve speakers today are John Williams at 10:00 and Michelle Bowman at 2:00 p.m.

Interest rate market futures at the short end of the curve are likely to be supported by ideas that major central banks, including the Federal Reserve, will keep short term interest rates low for an extended period. Many analysts believe it will be several years, possibly not until 2023, before the Federal Reserve will be in a position to hike its fed funds rate, which currently stands at zero to 25 basis points.

However, futures at the long end of the curve, especially the 30-year Treasury bond futures may be undermined by the inflationary aspects of the Federal Reserve’s “average inflation targeting” policy, along with the potential for a global economic recovery.

Financial futures markets are predicting there is a 96.5% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at the November 4-5 policy meeting.

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