Wednesday, March 08, 2017 9am EST
U.S. stocks were set to open little changed on Wednesday after a better-than-expected private sector hiring pointed to a healthy labor market, making an interest rate increase by the Federal Reserve next week near certain.
The report is seen as a precursor to Friday’s more comprehensive nonfarm payrolls data, which acts as a barometer for the health of the U.S. economy and is a key data point for the Fed to decide on rates.
The U.S. private sector added 298,000 jobs last month, blowing past economists’ average estimate of 190,000, according to the ADP National Employment report.
Traders have priced in an all-but-certain quarter point rate hike during the Fed’s meeting on March 14-15, but investors are keen to know whether the central bank would increase the pace of rate hikes.
Fed Chair Janet Yellen last week remarked that scaling back on monetary policy would likely not be as slow this year as it was in 2016 and 2015.
Though the markets have been more resilient to the prospects of higher rates now than they were last year, the chatter has put the brakes on a rally that took off on President Donald Trump’s promise of tax reforms and infrastructure spending.
“Even if the Fed raises rates next week, it would be to 75 basis points which is historically very low and is still considered very easy money,” said Adam Sarhan, chief executive officer at 50 Park Investments, in Florida.
“For the first time in years, you have hope that fiscal policy will be kicked into gear in the U.S. and other parts of the world … that leads to healthier economic conditions and that’s why stocks refuse to fall in a meaningful way.”
The S&P 500 SPX.N and the Dow Jones Industrial Average .DJI marked their first back-to-back losses in over one month on Tuesday.
Still, the S&P has not fallen more than 1 percent since Oct. 11.
The dollar gathered strength on Wednesday, while gold – which tends to lose value as rate rise – was lower.
Oil could weigh on the markets, following a 1 percent drop in prices after a report showed a large rise in U.S. crude inventories. [O/R]
Dow e-minis 1YMc1 were up 9 points, or 0.04 percent at 8:33 a.m. ET (1333 GMT), with 35,507 contracts changing hands.
S&P 500 e-minis ESc1 were down 0.75 points, or 0.03 percent, with 184,674 contracts traded.
Nasdaq 100 e-minis NQc1 were down 4.5 points, or 0.08 percent, on volume of 31,722 contracts.
Urban Outfitters (URBN.O) dropped 6 percent to $23.70 following a sales miss that led to William Blair to downgrade the stock and others to cut price targets.