MARKET SNAP: At 6:05 a.m. ET, S&P 500 futures down 0.1%. 10-Year Treasury yield lower at 2.72%. Nymex down 0.19% at $103.20. Gold 0.2% higher at $1313.70. In Europe, FTSE 100 down 0.3%, DAX down 1.1% and CAC 40 down 0.4%. In Asia, Nikkei 225 down 2.2% and Hang Seng down 1.2%.
WATCH FOR: Weekly Jobless Claims (8:30 a.m. Eastern Time): seen 335K; previously 339K. January Consumer Price Index (8:30): seen +0.1%; previously +0.3%. February Markit “Flash” PMI (9:00). February Philadelphia Fed Manufacturing Survey (10:00): seen 7.4; previously 9.4. January Leading Index (10:00): seen +0.4%; previously +0.1%. Actavis, Aruba Networks, Cabot Oil, Clear Channel, DirecTV, Express Scripts, Groupon, Hewlett-Packard, Intuit, Marvell Tech, Newmont Mining, Nordstrom, Priceline.com, Wal-Mart Stores and WebMD are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFING
The mere thought of the Federal Reserve raising interest rates evidently is enough to make investors nervous.
It shouldn’t. At least not yet.
Conversation at the Fed’s policy meeting last month turned to something that hasn’t been a serious topic for years: the possibility of interest-rate increases in the near future. The Fed last raised its benchmark interest rate in July 2006 and has held rates near zero since December 2008.
A rate increase is far from imminent, and is probably still years away. But the fact that a “few” Fed officials argued higher interest rates are needed to prevent the economy from overheating was enough to spook some folks. After flip-flopping from positive and negative territory on Wednesday, the Dow Jones Industrial Average finished near session lows, down 89 points.
Despite the drop, most market watchers don’t actually anticipate the Fed will raise interest rates anytime soon. Stocks have a propensity for falling on the days that the Fed releases its meeting minutes, but then tend to quickly bounce back.
This time may be no different.
Newly-minted Chairwoman Janet Yellen is in no hurry to raise rates in the near future. As she made clear in last week’s testimony before Congress, she is likely to stay the course set by former Chairman Ben Bernanke and keep accommodative conditions in place as the economy continues its slow recovery.
And as Adrian Miller of GMP Securities noted, the Fed funds futures market, where investors bet on interest-rate developments, showed little movement before and after the release of the minutes. They point to a rate increase taking place around September 2015.
Until then, the focus should remain on corporate earnings, economic fundamentals and the pace that the Fed continues to dial back its stimulus.
On the latter fronts, investors Thursday will get a fresh reading on inflation via the Labor Department’s consumer price index. Economists expect inflation remained muted last month, with the top-line index seen rising just 0.1%. Excluding volatile food and energy prices, CPI is expected to increase 0.2%.
Inflation has remained well below the Fed’s preferred rate for months, and the minutes showed a few Fed officials called into question the need to keep pulling back on stimulus with inflation so subdued.
“The minutes repeatedly referred to inflation risks on the downside,” said Dan Greenhaus, chief strategist at New York brokerage firm BTIG. “That may come as a surprise to some but we simply do not remember a recent FOMC minutes report quite as concerned about the downside risks to inflation.”
On the current list of investor worries– disappointing economic data, weak revenue growth and an uptick in volatility – fretting about a rate increase should remain near the bottom.
Morning MoneyBeat Daily Factoid: On this date in 1792, the U.S. Postal Service was created. Postage prices ranged between six cents and 25 cents, depending on the distance. Not bad considering a stamp costs 49 cents today
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