STOCK INDEX FUTURES
August nonfarm payrolls were down 54,000, which compared to an estimate of a decline of 105,000. Private payrolls increased 67,000, when a 40,000 increase was expected. The unemployment rate increased to 9.6%, as anticipated and average hourly earnings were up .3%, when a .1% advance was expected.
The 9:00 Central Time August Institute for Supply Management nonmanufacturing composite index is anticipated to be 53.2.
Stock index futures prices quickly soared when the 7:30 employment report was released.
As we get closer to the elections in November, the political influence on the market will play a more important role. One of the larger internet betting sites is predicting a 75% probability that the Republicans will take control of the House and that there is a 60% probability that the Democrats will retain control the Senate. A gridlocked Congress is bullish for stock index futures, according to history.
CURRENCIES
The euro gained after euro zone retail sales in July gained for the third consecutive month.
The British pound is higher even though a report showed the U.K. services industry expanded less than anticipated.
It is widely expected that the Bank of England will leave their benchmark interest rate unchanged at a record low of 50 basis points when they meet on September 9.
The "commodity currencies," the Australian dollar and the Canadian dollar advanced after the better than anticipated U.S. employment report was released.
The long term upside target for the Australian dollar is 95 and the long term upside objective for the Canadian dollar is parity with the U.S. dollar.
INTEREST RATE MARKETS
Futures are sharply lower because of the stronger than anticipated U.S. employment report, along with the bearish influence of higher equity and commodity prices.
Federal Reserve speakers today are Evans at 8:45 and Lockhart at 9:00.
The charts are looking toppy after two major uptrend lines were recently taken out on the downside on the 30-year bond daily chart.
Currently, there is a 69% probability that the FOMC will increase their fed funds target by at least 25 basis points on or before their November 2, 2011 meeting.
Questions or commnets, I can be reached at 877.690.7303 or via e-mail at alan.bush@archerfinancials.com. Additional research can be found at www.archerfinancials.com/research.aspx.
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