March 18, 2010
STOCK INDEX FUTURES
The February consumer price index was unchanged, which compares to an estimate of a .1% increase and the consumer price index, excluding food and energy, was up .1% as anticipated.
Initial jobless claims in the week ended March 13 were 457,000, when 455,000 were expected and continuing claims in the week ended March 6 were 4.579 million, which compares to a guess of 4.522 million.
Two 9:00 Central Time reports are scheduled. The March Philadelphia Fed Index is anticipated to be 18 and the February leading indicators report is anticipated to show a .1% advance.
S&P, Dow and NASDAQ futures are all at new highs for the year. Some technicians have become bullish now that the Dow has advanced past the midpoint of its last bull market.
Our research continues to tell us that this bull market will continue through 2010.
CURRENCIES
The U.S. dollar is higher and the euro is lower due to worries that Greece will fail to get a guaranteed assistance commitment from the European Union.
The greenback was also supported after it was announced the China is taking additional steps to rein in lending.
The Australian dollar and the Canadian dollar are a little lower on fears that China will take additional measures to slow their economic growth, which would reduce the demand for the commodities that Australia and Canada export. In the longer term, the Australian and Canadian currencies should be supported by rising global equity and commodity prices, along with prospects of tighter credit from the Reserve Bank of Australia and the Bank of Canada.
Of the major currencies traded, the Australian currency is likely to be the strongest currency this year, followed by the Canadian dollar.
INTEREST RATES
Treasuries are being temporarily supported by the belief that Federal Reserve policy will remain accommodative for a longer period of time than what many analysts had previously thought.
Today the Treasury will announce details of next week's auctions of two, five and seven year notes. It is estimated that the Treasury will sell $44 billion in two year notes on March 23, $42 billion in five year notes on the 24 and $32 billion in seven year notes on March 25.
Currently, financial markets are factoring in a 73% probability that the Federal Open Market Committee will increase their fed funds target by 25 basis points to 50 basis points on or before their November 3 meeting. Our analysis suggests that the FOMC will not increase interest rates until 2011.
Even though the "on hold" Fed policy will support the front end of the curve, it is likely that the bearish influence of stronger than expected economic growth will be the dominate influence and will put pressure on the longer dated Treasuries, especially for the thirty year Treasury bond.
If you would like more information about this article, please contact us at 1.877.690.7303 or send and email to alan.bush@archerfinancials.com. Additional research can be found at www.archerfinancials.com/research.aspx.
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