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Stocks - U.S. Futures Pull Back From Record Highs in Key Week for Earnings, Data

Published 2018-01-29, 06:49 a/m
© Reuters.  Wall Street futures point to lower open as earnings, data eyed
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Investing.com - U.S. futures pointed to a lower open on Wall Street, suggesting major stock benchmarks were set to pull back from record eyes as investors braced for a big week in data and earnings.

The blue-chip Dow futures fell 32 points, or 0.12%, by 6:42AM ET (11:42GMT), the S&P 500 futures lost 7 points, or 0.23%, while the tech-heavy Nasdaq 100 futures traded down 19 points, or 0.27%

At 8:30AM ET (13:30GMT), investors will digest economic data on personal income & spending for December, as well as other key inflation data.

In the last case, the personal consumption expenditures inflation data is expected to show annual inflation sticking to a reading of 1.5%. The data will form part of the key last ingredients for the Federal Reserve to decide on its next policy move at its two-day meeting this week.

The U.S. central bank is forecast to hold steady on interest rates when it announces its decision on Wednesday, keeping it in a range between 1.25%-1.50%. This week's meeting will be the last under the leadership of Janet Yellen, before she is replaced by current Fed governor Jerome Powell.

Powell is widely anticipated to represent a continuation of policy with the majority of economists forecasting that the Fed will hike rates in March, followed by another increase in June, with a third move higher arriving in December.

Also a key protagonist on this week’s economic calendar, the U.S. Labor Department will release its January nonfarm payrolls report at 8:30AM ET (1330GMT) on Friday.

The consensus forecast is that the data will show jobs growth of 184,000, after rising by 148,000 in December. The unemployment rate is forecast to hold steady at 4.1%. Most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.3% after gaining 0.3% a month earlier.

Ahead of the releases, the U.S. dollar edged higher against a basket of currencies on Monday, recovering somewhat from six straight weeks of losses. At 6:43AM ET (11:43GMT), the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.25% to 89.09, extending its rebound from a three-year nadir of 88.25 set on Thursday, when Treasury Secretary Steven Mnuchin talked up the benefits of a weaker currency.

Meanwhile, the yield on the benchmark U.S. 10-year note hit its highest level in almost four years on Monday. Specifically, the 10-year yield rose to an intraday high of 2.724%, a level not seen since April 2014 and was last at 2.718%, up 5.6 basis points, or roughly 2.1% by 6:44AM ET (11:44GMT).

The benchmark yield has not been above 3% since late 2013 and some investors believe that level will be tested in the months ahead amid expectations that an economy boosted by tax reform will compel further policy tightening from the Federal Reserve this year.

On the earnings front, Lockheed Martin (NYSE:LMT) will be the major focus on Monday in what will be another big week for the fourth quarter reporting season. Heavy-weights such as McDonald’s (NYSE:MCD), AMD, Boeing (NYSE:BA), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) or Alibaba (NYSE:BABA) will all release earnings this week.

The fourth quarter earnings period has been strong thus far. With 133 of the S&P 500 firms having already reported 81% beat consensus on profit thanks to 18% growth in earnings, while 85% topped sales estimates on 8.5% growth, according to calculations from The Earnings Scout who proclaim these to be the best numbers in five years.

Meanwhile, crude oil prices headed lower on Monday, but remained near their strongest levels since 2014. Prices have been supported by optimism that OPEC-led output cuts would continue to drain the market of excess supplies.

However, concerns remain that high prices will only push U.S. shale producers to jump into production. In fact, the number of oil drilling rigs climbed by 12 to 759 last week, Baker Hughes energy services firm said in its closely followed report late Friday. That marked the biggest weekly increase in the rig count since March.

U.S. crude futures 0.54% to $65.78 by 6:46AM ET (11:46GMT), while Brent oil traded down 0.83% to $69.57.

Elsewhere, European stocks struggled in midday trade, showing mixed signs across the major benchmarks as investors digested earnings and kept an eye on merger news.

Tech stocks were on the rise, getting a boost from the fact that Swiss chipmaker Ams (SIX:AMS), a key supplier for U.S. giant Apple, reported a doubling of its 2017 revenues and raised its earnings guidance far in excess of expectations.

Also grabbing headlines on the Old Continent, French drugmaker Sanofi (PA:SASY) has agreed to buy Belgian biotech company Ablynx (BR:ABLX) for €3.9 billion ($4.8 billion), beating Novo Nordisk (CO:NOVOb) and marking its second big deal this month after buying Bioverativ.

At 6:56AM ET (10:56GMT), the European benchmark Euro Stoxx 50 fell 0.74%, Germany’s DAX lost 0.75%, while London's FTSE 100 broke the trend, trading up 0.24%.

Earlier, Asian shares closed with mixed signs with benchmarks in Seoul and Australia ending higher, while Shanghai dropped nearly 1% and Tokyo ended flat, supported by a weaker yen.

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