March 4, 2010
STOCK INDEX FUTURES
In the week ended February 27th, initial jobless claims were down 29,000 to 469,000, which compares to an estimate of 470,000 and continuing claims in the week ended February 20th were 4.5 million when 4.6 million were anticipated.
Fourth quarter nonfarm productivity was up 6.9%, when a 6.3% increase was anticipated.
The 9: 00 Central Time January factory orders report is expected to be up 1.8% and the January pending home sales report is anticipated to show a 1% increase.
Yesterday's release of the Federal Reserve's "Beige Book" showed that nine of the twelve regional districts reported improvement in economic activity. The Fed's "Beige Book" was compiled in advance of their January 27th Federal Open Market Committee meeting.
Our research continues to tell us that the main trend for futures is higher and that all of the major U.S. stock indexes will make new highs for the move in 2010.
CURRENCIES
The U.S. dollar is a little higher now that the initial reaction to yesterday's release of the Greek austerity package is beginning to fade. There was news yesterday that Greece's government passed a measure to lower spending by 2.4 billion euros, while raising an additional 2.4 billion euros in revenue. Greece appears to be living up to their pledge to do what is needed to reduce their budget deficit.
The euro is slightly lower after the European Central Bank left credit policies unchanged for the tenth month, as expected. Their benchmark interest rate remains at a record low of 100 basis points.
The British pound is slightly higher after the Bank of England left their benchmark interest rate unchanged at a record low of 50 basis points and maintained their bond purchase program. An unchanged BOE policy was widely anticipated.
The Canadian dollar is higher due to the belief that the Bank of Canada will increase their benchmark interest rate in the second half of 2010. This offset the bearish influence of mildly lower commodity prices.
The Australian dollar is a little lower, but came off its lows on news that Australia's trade deficit narrowed in January from December.
The Australian currency is likely to be the strongest currency this year.
INTEREST RATES
At 9:00 Allison of the Treasury will testify to a Congressional TARP panel.
Federal Reserve speakers today are Bullard at 9:15 and Evans at 12:25.
The probability that the Federal Open Market Committee will increase their fed funds target by 25 basis points to 50 basis points at or before their November 3rd meeting is 47%, according to the financial futures markets. Our analysis of Fed policy suggests that the U.S. central bank will not raise interest rates until 2011.
Today the Treasury will announce the details of next week's auction of three and ten year notes, and thirty year bonds. A total package of $74 billion is anticipated.
We believe that the main trend for the longer dated Treasury issues is lower.
For more information about this article, please call 1.877.690.7303 or send an email to alan.bush@archerfinancials.com. Additional research can be found at www.archerfinancials.com/research.aspx.
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