Upbeat Jobs Data May Add To Interest Rate Concerns
By Investors Hub
The major U.S. index futures are pointing to a lower opening on Friday, with stocks likely to come under pressure following the mixed performance seen in the previous session.
Concerns about higher interest rates may weigh on Wall Street after the Labor Department released a report showing stronger than expected job growth and a jump in wages.
“Given companies such as WalMart have credited Trump’s tax cuts as a way for them to afford higher worker pay we suspect we will see the wage numbers pick-up further,” said James Knightley, Chief International Economist at ING.
He added, “Consequently, it will need a big shock to prevent the Fed from hiking in March, but it could happen in the form of a damaging government shutdown should politicians fail to resolve their differences.”
Following the modest rebound seen on Wednesday, stocks showed a lack of direction over the course of the trading day on Thursday. The major averages spent much of the day bouncing back and forth across the unchanged line.
Eventually, the major averages ended the session mixed. While the Dow inched up 37.32 points or 0.1 percent to 26,186.71, the Nasdaq fell 25.62 points or 0.4 percent to 7,385.86 and the S&P 500 edged down 1.83 points or 0.1 percent to 2,821.98.
The choppy trading on Wall Street came as traders seemed reluctant to make significant moves ahead of the release of the closely watched monthly jobs report.
Earnings reports due after the close of trading from Google parent Alphabet (GOOGL), Amazon (AMZN) and Apple (AAPL) may also have kept traders on the sidelines.
On the U.S. economic front, a report released by the Labor Department unexpectedly showed a modest decrease in labor productivity in the fourth quarter, although the report also showed a sharp jump in labor costs.
The report said labor productivity edged down by 0.1 percent in the fourth quarter after surging up by a revised 2.7 percent in the third quarter. Economists had expected productivity to climb by 1.0 percent.
Meanwhile, 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. Labor costs were expected to increase by 0.8 percent.
A separate report from the Labor Department showed a slight drop in first-time claims for U.S. unemployment benefits in the week ended January 27th.
The report said initial jobless claims edged down to 230,000, a decrease of 1,000 from the previous week’s revised level of 231,000. Economists had expected jobless claims to rise to 238,000.
The Institute for Supply Management also released a report showing a modest slowdown in the pace of growth in manufacturing activity in the month of January.
The ISM said its purchasing managers index edged down to 59.1 in January from 59.3 in December, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to dip to 58.8.
Commercial real estate stocks showed a significant move to the downside on the day, resulting in a 2.2 percent slump by the Morgan Stanley REIT Index. With the drop, the index ended the session at its lowest closing level in over a year.
The weakness in the commercial real estate sector likely reflected concerns about the impact of higher interest rates.
Considerable weakness also emerged among retail stocks, as reflected by the 1.7 percent loss posted by the Dow Jones Retail Index.
Alibaba (BABA) posted a steep loss after the China-based online retail giant reported fiscal third quarter earnings that missed expectations.
Utilities and chemical stocks also moved notably lower, while substantial strength was visible among oil service and brokerage stocks.
