The futures markets are well in the green this morning, following a weak trading session yesterday. Interest rates on high quality bonds have fallen slightly this morning, and stocks have taken this news favorably. Few economic reports are on the horizon today, though pending home sales will be released once the stock market opens. Additionally, Federal Reserve Governor Michael Barr will be testifying to the House Financial Services Committee later today on bank regulation in light of recent events.
Overall, stock futures suggest a positive start to the trading day. The stock market slid lower yesterday, as traders refocused on interest rates from bank-related issues. The indices trended lower through the day and finished not far from their lows. Overall, the S&P 500 fell 6 points (down 0.16%), the NASDAQ declined 53 points (down 0.45%), and the Dow Jones Industrial Average was off 38 points (down 0.12%). Despite the lower prices, market breadth was positive, as advancers outpaced decliners by a 1.5-to-1.0 ratio. Energy stocks were among the best performers, aided by a notable rise in the related commodities. However, communications stocks were among the weakest, likely impacted by higher interest rates given their higher debt loads.
In commodity news, oil prices rose yesterday as a decline in the expected supply occurred. The Federal government of Iraq halted production exports from Iraq’s semi-autonomous Kurdistan region. This followed an International Chamber of Commerce ruling against Turkey, which had received the oil from Kurdistan without the Iraqi Federal government’s approval. This accounts for around 400,000 barrels per day of exports and will likely cause a supply-demand imbalance in international markets. Elsewhere, U.S. Treasury bond yields were higher across the board, though short-term rates rose slightly more than long-term ones. Market participants remain uncertain whether the Federal Reserve has finished its path of interest rate hikes, and rates have been quite volatile in recent trading sessions. The Chicago Board Options Exchange Volatility Index, or VIX, fell yesterday as demand for options protection declined.
Several economic reports will be released in the days ahead. These include the second revision of Gross Domestic Product (GDP) for the 4th quarter of 2022, and initial and continuing jobless claims on Thursday. February personal income and spending, core- and non-core personal consumption expenditures, and the University of Michigan’s consumer sentiment index will be released on Friday. Additionally, several Federal Reserve regional presidents will give remarks on the economy in the days ahead. Elsewhere, several dozen mostly smaller companies will report quarterly results and guidance in the coming days, though this represents a relatively low number of earnings reports. We think most eyes will be on data showing how inflation and the consumer are faring. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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