U.S. Stocks Set For Lower Start In February

stock floor

U.S. stock indexes are pointing to a lower open on the first day of February as the yield on the 10 yr. Treasury continues to climb above 2.7 percent and a new report this morning from the Bureau of Labor and Statistics shows that Unit labor costs in the nonfarm business sector increased 2.0 percent in the fourth quarter of 2017, largely from a 1.8 percent increase in hourly compensation, boosting the prospects for rising inflation and a future interest rate hike from the U.S. Federal Reserve.

Over the past 4 quarters, Unit labor costs increased 1.3 percent.

The yield on the 1o yr. Treasury remains at a 3 yr. high and jumped to as high as 2.75 percent earlier on Thursday but has come off its highs.

The 10 yr. Treasury is currently at 2.73 percent.

The U.S. Federal Reserve has recently signaled a hawkish tone about future rate hikes and normalizing monetary policy and the market is largely pricing in a rate hike during the Fed’s next policy meeting on March 21st.

According to CME’s Fed Watcher tool, the probability of a .25 basis pt. hike with the U.S. federal funds remains high at 83.1 percent with the federal funds prime target rate moving to 1.50-1.75 percent from its current level of 1.25-1.50 percent.

Tech Earnings

Investors will be eyeing corporate earning reports from Amazon, Alphabet (Goog), and Apple after the closing bell today.

Yesterday, Microsoft reported their 2Q 2018 fiscal quarter earnings that saw quarterly revenue rising 12 percent  and operating income increased 10 percent but the Redmond based company took a 13.8 billion charge from their tax bill.

Written and Edited By:

Johnathan Schweitzer

 

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