STOCK INDEX FUTURES

Prices are lower due to ongoing concerns about the sovereign debt situation in the euro zone and because of the resulting potential impediments to the global economic recovery.  There was some price recovery for stock index futures due to merger news and acquisition news.

There are no major economic reports scheduled for today.

The unofficial start of fourth quarter corporate earnings season starts after the close today, when Alcoa Inc. releases their earnings numbers.  Analysts are anticipating earnings for Alcoa will be 19 cents per share. That would be the largest profit in two years. There is a rule of thumb that says, "as goes earnings for Alcoa, so goes the earnings for the rest of the Dow Jones Industrial companies."

Corporate earnings for the first three quarters of 2010 were stronger than the analysts' estimates and, according to our analysis, fourth quarter results should be no exception.

According to a Bloomberg survey, S&P 500 corporate earnings in 2011 will increase 14%.

Recently, we have seen a tendency for futures to ignore bearish news or only temporarily decline. Most likely today's trade will be no exception. Expect futures to recover from the current lower levels.

Expect this bull market for stock index futures to continue well into 2011.

CURRENCIES

The euro dropped to a four-month low against the U.S. dollar on the belief that the ongoing sovereign debt problems in the euro zone will remain.  Portugal, Spain and Italy will auction government debt this week.

There is growing pressure for Portugal to ask for financial support from the European Union and the International Monetary Fund. An EU spokesman said there are "no talks going on."   This strong denial tells us that there are ongoing talks or that discussions are planned.

The British pound was a little lower after a report showed U.K. house prices dropped in December.

The Australian dollar is lower due to a new downpour of rain. There has already been record rainfall, which has caused massive flooding in the state of Queensland.  

Expect higher prices for the Australian dollar today from current levels. In the longer term, the Australian dollar will probably trade higher as well, as interest rate differentials remain supportive.

Interest rate differentials are bullish for the Canadian dollar. There is more talk that the Bank of Canada may increase interest rates sooner than many analysts have previously forecast.

Expect higher prices for the Canadian dollar from current levels.

INTEREST RATE MARKETS

At 11:40 Central Time, Lockhart of the Federal Reserve will speak on the economic outlook.  

The Treasury will sell $66 billion of securities this week. On Tuesday, they will sell $32 billion in three-year notes. On Wednesday, they will sell $21 billion in ten-year notes and on Thursday, they will auction $13 billion in thirty-year bonds.

Financial futures markets are currently predicting a 52% chance that the Federal Reserve will increase their fed funds target rate by 25 basis points on or before their January 2012 meeting.

In the long term, the longer dated maturities are likely to be the weakest performers on the belief that the global economic recovery will accelerate in 2011.

We are in the early stages of a multiyear bear market for Treasury futures.

For additional information, 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.

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 views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  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.

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2007-03-30