Coronavirus Influence Dominates all Markets

February 27, 2020

STOCK INDEX FUTURES

The U.S. annualized gross domestic product in the fourth quarter was up 2.1%, as expected.

U.S. durable goods orders in January fell 0.2% when a decline of 1.2% was anticipated.

Initial jobless claims increased 8,000 in the week ended February 22 to a seasonally adjusted 219,000. Economists forecasted 214,000 new claims.

The 9:00 central time January pending home sales index is expected to show an increase of 2.2% and the 10:00 February Kansas City Federal Reserve manufacturing index is estimated to be negative 1.0.

In other global respiratory virus outbreaks in the past 20 years we have seen stock indexes futures decline 11% to 16% before a bottom. Currently, the S&P 500 is down slightly over 10%.

CURRENCY FUTURES

The euro currency is higher after a report showed euro zone economic confidence strengthened to a nine-month high in February, according to the European Commission. The economic sentiment index came in at 103.5 in February when economists had forecast the reading of 102.6.

In addition, there is a report that the German government is considering various scenarios and plans to add stimulus in an effort to combat the virus epidemic if it hits the German economy hard.

The probability of a European Central Bank rate cut in July increased significantly to approximately 70%. The chance of a July rate cut increased to approximately 70% from 50% on Monday.

Longer term, higher prices are likely for the U.S. dollar and lower prices are likely for the euro currency.

INTEREST RATE MARKET FUTURES

Futures are higher as flight to quality buying continues to come into the market.

The yield on the 10-year Treasury notes declined below 1.30%, falling further into record low territory.

Charles Evans of the Federal Reserve will speak 10:30.

The Treasury will auction seven notes today.

The spread of the coronavirus outside China prompted traders to ramp-up expectations for more stimulus.

Financial futures markets are predicting there is 95% probability that the Federal Open Market Committee will lower its fed funds rate at its June 10, 2020 policy meeting. Yesterday the probability was 79%.

SUPPORT AND RESISTANCE

March 20S&P 500

Support 3025.00 Resistance 3120.00

March 20 U.S. Dollar Index

Support 98.400 Resistance 99.030

March 20Euro Currency

Support 1.08830 Resistance 1.10050

March 20Japanese Yen

Support .90550 Resistance .91250

March 20Canadian Dollar

Support .74700 Resistance .75150

March 20Australian Dollar

Support .6541 Resistance .6593

March 20 Thirty Year Treasury Bonds

Support 167^12 Resistance 169^10

April 20Gold

Support 1637.0 Resistance 1665.0

April 20 Crude Oil

Support 46.11 Resistance 48.88

May 20Copper

Support 2.5350 Resistance 2.5750

Contact Alan for more extensive information on these markets at 312.242.7911 or via email at alan.bush@admis.com. Thank you.


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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by Archer Daniels Midland Company. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.