By Mark DeCambre and Victor Reklaitis, MarketWatch
Apple earnings on deck after the closing bell
U.S. stock benchmarks struggled for direction Thursday,
underlining what may be a new era of emerging volatility on Wall
Street as investors weigh concerns about pick up in inflation and
rising bond yields against equities that have almost relentlessly
risen to records.
What are the main benchmarks doing?
The Dow Jones Industrial Average were down 31 points, or 0.1%,
to 26,117, well off its opening nadir at 26,014, when the average
was down by 135 points. Shares of Boeing Co.(BA) were contributing
about 30 points to the blue-chip gauge.
Meanwhile, the S&P 500 index retreated 2 points, or 0.1%, to
2,821, with telecommunications, consumer staples, utilities and
materials sectors all down firmly.
The Nasdaq Composite Index , meanwhile, traded flat to slightly
higher at about 7,420.
On Wednesday, the Dow rose by 72.50 points, or 0.3%
(http://www.marketwatch.com/story/dow-set-to-stabilize-after-shedding-540-points-in-2-days-2018-01-31),
while the S&P and Nasdaq Composite inched higher. The moves
came as the Federal Reserve kept a key interest rate steady but
signaled it's on course to hike rates
(http://www.marketwatch.com/story/fed-takes-step-toward-rate-hike-as-baton-set-to-pass-to-powell-2018-01-31)
at its meeting next month.
Check out:Here's how the Dow, S&P 500 tend to perform after
a rip-roaring January
(http://www.marketwatch.com/story/heres-how-the-dow-sp-500-tend-to-perform-after-a-rip-roaring-january-2018-01-31)
What are driving markets?
Market participants say fears of resurgent inflation, which has
been sluggish and hanging below the Federal Reserve's 2% annual
target, is beginning to resurface and rattle investors. Signs of
tightness in the labor market, implies that wage growth, and
inflation might pick up sooner than Wall Street has been expecting,
compelling the Fed to accelerate its pace of interest-rate
hikes.
Fridays job report will be closely pored over to determine if
the unemployment rate falls below 4% and an increase in wage, both
factors would point to a resurgence of rising prices.
What are strategists saying?
Robert Pavlik, chief investment strategist at SlateStone Wealth
LLC, said reflationary fears, as the 10-year Treasury yield rises
to a fresh three-year high above 2.75%, may be causing concerns. He
also said that signs that inflation may be rearing up has been
rattling investors.
"I think the market has been sniffing around for something to
get concerned about and I think that the more directionless trade
is the more you worry about inflation," he said.
"The market doesn't seem to know which way it wants to go right
now," said Randy Frederick,vice president for trading and
derivatives at the Schwab Center for Financial Research.
"Labor shortages all of sudden could mean that inflationary
pressures are showing their teeth," he said. Rising inflation is
bad for bonds because it undercuts a bond's fixed value and can
lead to selling, pushing yields higher. Bond prices move inversely
to yields.
"And we are already seeing yields rise and obviously that
creates problems for equities and that could potentially stifle
earnings," he said.
"The Federal Reserve has given us a clear message that, barring
some sort of collapse in sentiment over the next few weeks, March
is good to go to lift the fed funds rate," said Chris Weston, chief
market strategist at IG.
"The narrative perhaps even throws weight to the camp that we
would see hikes in the August, September and December meetings,
too," he said in a note.
What data are in focus?
The number of people who applied for unemployment benefits in
late January fell by 1,000 to 230,000
(http://www.marketwatch.com/story/jobless-claims-fall-slightly-to-230000-layoffs-extremely-low-2018-02-01),
keeping initial U.S. jobless claims near a 45-year low. Economists
polled by MarketWatch had forecast a 240,000 reading in the seven
days ended Jan. 27.
Meanwhile, the productivity of U.S. firms and workers fell
(http://www.marketwatch.com/story/us-productivity-dips-01-in-fourth-quarter-ends-2017-on-sour-note-2018-02-01)
at a 0.1% annual pace in the fourth quarter. Economists polled by
MarketWatch forecast a 0.2% gain.
The Institute for Supply Management
(https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?navItemNumber=31000&SSO=1)said
its manufacturing index in January slipped to 59.1% from 59.3% in
December. Economists polled by MarketWatch expected a reading of
58.6%. The IHS Markit manufacturing reading showed that final U.S.
PMI steady at 55.5 in January from flash estimates.
Separately, the Commerce Department reported a 0.7% gain in
construction spending
(http://www.marketwatch.com/story/construction-spending-climbs-for-fifth-month-to-new-record-2018-02-01)
in December, and a 2.6% advance over the last 12 months. That's the
fifth monthly gain in a row and a record high.
Detroit auto makers on Thursday reported underwhelming U.S. auto
sales in January
(http://www.marketwatch.com/story/car-makers-post-lackluster-us-january-sales-2018-02-01),
signaling car industry volumes will get off to a relatively muted
start even as the broader economy is strong.
Check out:MarketWatch's Economic Calendar
(http://www.marketwatch.com/economy-politics/calendars/economic)
On the Federal Reserve front, San Francisco Fed President John
Williams is due to give a speech at The City Club in San Francisco
at 3:30 p.m. Eastern.
Which stocks look like key movers?
Shares of online auctioneer eBay Inc.(EBAY) rose 14% after
announcing that it plans to take over crucial payments-processing
duties
(http://www.marketwatch.com/story/ebay-breaks-up-with-paypal-again-stock-soars-as-paypal-shares-dive-2018-01-31)
from PayPal Holdings Inc.(PYPL) as it posted quarterly earnings
(http://www.marketwatch.com/story/paypal-stock-falls-after-fourth-quarter-earnings-2018-01-31).
Shares of PayPal were off 8.4%, meanwhile.
Qorvo Inc.'s stock (QRVO) was up 16% after it reported quarterly
revenue that was better than expected
(https://www.barrons.com/articles/qorvo-stock-already-reflects-weak-apple-results-says-drexel-1517437350).
The company, an Apple supplier, was created by the merger of
TriQuint Semiconductor and RF Micro Devices.
Facebook Inc.'s stock (FB) was 3% higher after the social media
giant late Wednesday reported double-digit advertising price growth
(http://www.marketwatch.com/story/facebook-earnings-stock-touches-record-after-massive-ad-price-increase-2018-01-31)
amid massive changes to its core product. Shares initially dropped
as the company's release revealed a decline in usage of its
platform.
Check out:Facebook's 'powerful' ad business means it's time to
buy -- analysts react to earnings
(http://www.marketwatch.com/story/facebooks-powerful-ad-business-means-its-time-to-buy-analysts-react-to-earnings-2018-02-01)
Apple Inc. shares (AAPL) were off less than 0.1% ahead of the
tech giant's report after the closing bell.
See:The $1,000 iPhone X remains the story as Apple's earnings
arrive
(http://www.marketwatch.com/story/apple-earnings-forget-taxes-and-batteries-the-1000-iphone-x-remains-the-story-2018-01-26)
Microsoft Corp.'s stock (MSFT) was up 0.2% after the software
heavyweight posted better-than-expected earnings
(http://www.marketwatch.com/story/shares-of-microsoft-slide-as-software-giant-reports-a-quarterly-loss-on-tax-cuts-2018-01-31).
Shares of Fiat Chrysler Automobiles N.V. (FCA.MI) slumped 2.1%
in morning trade
(http://www.marketwatch.com/story/fiat-chryslers-stock-falls-as-us-vehicles-sales-drop-sharply-2018-02-01)Thursday,
after the auto maker reported a sharp drop in U.S. vehicle sales in
January. Total sales declined 13% to 132,803 vehicles, as Chrysler
brand sales dropped 21%.
Shares of Hershey Co.(HSY) were down 6% in early trade reported
fourth-quarter net income of $181.1 million
(http://www.marketwatch.com/story/hershey-earnings-and-sales-miss-consensus-2018-02-01),
or 85 cents per share, up from $116.9 million, or 55 cents per
share, for the same period last year.
First Take:Microsoft earnings show Nadella is blazing the right
path
(http://www.marketwatch.com/story/microsoft-earnings-show-nadella-is-blazing-the-right-path-2018-01-31)
What are other assets doing?
European stocks traded lower
(http://www.marketwatch.com/story/european-stocks-break-3-day-losing-run-after-solid-finance-tech-earnings-2018-02-01),
while Asian markets closed mixed. Gold were little changed, as oil
futures advanced. The ICE U.S. Dollar Index was dipping.
(END) Dow Jones Newswires
February 01, 2018 10:58 ET (15:58 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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