Nonfarm Payrolls Weak
STOCK INDEX FUTURES
Prices were lower in the overnight trade. However, prices turned on a dime and advanced when the on balance weaker than expected employment data was released.
August nonfarm payrolls increased 142,000, which compares to the estimate of a 230,000 gain. The lesser important unemployment rate, at least from a market impact point of view, declined .1% to 6.1%, when 6.2% was anticipated.
Manufacturing payrolls were unchanged, which compares to the estimate of up 18,000.
The on balance weaker than expected employment data can be construed as bullish for stock index futures because it may influence the Federal Reserve to keep interest rates lower for a longer period.
Expect a move to higher on the day.
The main trend for stock index futures is higher.
CURRENCY FUTURES
After making 14 month highs in the overnight trade, the U.S. dollar is now lower. The reversal was entirely due to the weaker than expected U.S. employment data.
By the same token, weak employment data in the U.S. was the main reason for recovery gains in the euro, the Swiss franc, the Japanese yen and theAustralian dollar.
The euro is higher in spite of a report that showed euro zone investment in the second quarter declined for the first time in over a year.
The fundamentals and the technical aspects of the euro remain bearish.
After making an almost six month low in the overnight trade, the Japanese yen is higher today.
However, lower prices are likely for the yen longer term due to the growing belief that the Bank of Japan will add more stimulus to its economy.
INTEREST RATE MARKET FUTURES
Futures were lower in the overnight trade due to reduced tensions in Ukraine. However, prices are higher now in response to the weaker than expected U.S. employment data.
Rosengren of the Federal Reserve will speak at 2:45 central time.
Financial futures markets are pricing in a 68% probability that the Federal Reserve will increase its fed funds rate at its July 29, 2015 policy meeting. Our analysis, which very much is a minority view, suggests the Fed will not be in a position to increase its fed funds rate until 2016.
The thirty year Treasury bond futures are holding in a major area of support.
The main trend for the thirty year Treasury bond futures is higher.
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Alan Bush has been a commodity analyst since 1976 focusing on the fundamental and technical aspects of stock index, interest rate and foreign currency markets. He has authored several articles for Stocks Futures and Options magazine and produced the 'Futures Tech Focus' program, which is a technically based market outlook.
Alan served on the faculty of Oakton College as instructor of a course entitled, 'Principles of Technical Analysis.' He has been interviewed on many national television programs, appearing on the Nightly Business Report, CNBC, CNN Moneyline, Reuters Television and Web FN. In addition, he has been frequently quoted in The Wall Street Journal, USA Today, The Bond Buyer and the Chicago Tribune and has been regularly interviewed on Chicago's WMAQ radio business reports.
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