By Investors Hub
The major U.S. index futures are pointing to a lower opening on Thursday, with stocks likely to move back to the downside following the modest rebound seen in the previous session.
The futures saw further downside following the release of a report from the Labor Department showing a sharp jump in labor costs in the fourth quarter.
The Labor Department said unit labor costs spiked by 2.0 percent in the fourth quarter after slipping by a revised 0.1 percent in the third quarter. Economists had expected costs to climb by 0.8 percent.
The data may raise concerns about the outlook for interest rates after the Federal Reserve predicted inflation would move up this year and stabilize around its 2 percent objective over the medium term.
Stocks fluctuated over the course of the trading session on Wednesday after failing to sustain an early move to the upside. The major averages bounced back and forth across the unchanged line before closing modestly higher.
The major averages finished the session in positive territory after closing lower for two straight days. The Dow rose 72.50 points or 0.3 percent to 26,149.39, the Nasdaq inched up 9.00 points or 0.1 percent to 7,411.48 and the S&P 500 crept up 1.38 points or 0.1 percent to 2,823.81.
The modestly higher close on Wall Street came after the Federal Reserve announced its widely expected decision to leave interest rates unchanged.
The Fed’s accompanying statement was seen as slightly more hawkish, reinforcing expectations the central bank will raise rates at its next meeting in March.
In the statement, the Fed said data received since its last meeting in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate.
The central bank reiterated that it expects economic conditions to evolve in a manner that will warrant further gradual increases in the federal funds rate.
“Janet Yellen’s final policy meeting as Fed Chair pretty much summed up her entire tenure; policy was left accommodative but there were hints it will be tightened gradually in the future,” said Michael Pearce, Senior U.S. Economist at Capital Economics.
He added, “The slightly more hawkish language in the statement is enough to confirm expectations of a March hike and adds weight to our view that the Fed will raise rates four times this year.”
On the U.S. economic front, payroll processor ADP released a report showing stronger than expected private sector job growth in the month of January.
ADP said employment in the private sector spiked by 234,000 jobs in January after surging up by a revised 242,000 jobs in December.
Economists had expected an increase of about 185,000 jobs compared to the jump of 250,000 jobs originally reported for the previous month.
A separate report from the National Association of Realtors showed pending home sales increased for the third consecutive month in December.
NAR said its pending home sales index climbed by 0.5 percent to 110.1 in December after rising by 0.3 percent to an upwardly revised 109.6 in November. Economists had expected the index to increase by 0.4 percent.
Software stocks turned in some of the market’s best performances on the day, resulting in a 1.6 percent advance by the Dow Jones Software Index.
Video game publisher Electronic Arts (EA) posted a standout gain after reporting weaker than expected fiscal third quarter results but providing upbeat guidance for the current quarter.
Considerable strength was also visible among commercial real estate stocks, as reflected by the 1.8 percent gain posted by the Morgan Stanley REIT Index. The index rebounded after ending the previous session at its lowest closing level in over a year.
Gold and utilities stocks also moved notably higher on the day, while pharmaceutical, biotechnology, and trucking stocks showed significant moves to the downside.
Eli Lilly (LLY) helped to lead the pharmaceutical sector lower even though the drug maker reported better than expected fourth quarter results.
