Stock Futures Down for Thursday; Unemployment Benefit Rises
Stock futures fell Thursday after new reports showed claims for unemployment benefits rose unexpectedly last week and inflation jumped more than forecast in January.
Both reports raise concerns that the economy might struggle to recover throughout the year and could put a recent market rally on pause.
Major indexes rose the past two days as investors turned their attention to domestic earnings and economic reports that showed the economy is improving. The Dow Jones industrial average has risen more than 200 points so far in this holiday-shortened trading week.
The Labor Department said the number or workers seeking unemployment benefits for the first time rose by 31,000 to a seasonally adjusted 473,000 last week. Economists polled by Thomson Reuters, on average, forecast claims would fall to 430,000.
The report provides a sobering reminder that unemployment remains high and a major obstacle to a sustained recovery.
At the same time, the Labor Department said inflation at the wholesale level rose more than expected in January, which could force the Federal Reserve to raise interest rates sooner than had been expected.
Wholesale prices rose 1.4 percent last month, double what economists had forecast. Rising energy prices helped push prices sharply higher.
The Producer Price Index rose 0.3 percent even excluding volatile energy and food prices. Economists forecast the “core” rate would rise just 0.1 percent last month.
A jump in inflation would put the Fed in a precarious position of having to raise interest rates to fight the rising prices. It has kept rates at historic lows to try and help boost the economy. Analysts are concerned that if the Fed raises rates too early it could derail any potential for a strong, sustainable recovery, which would then make it tougher for the jobs market to rebound.
Ahead of the opening bell, Dow Jones industrial average futures fell 45, or 0.4 percent, to 10,251. Standard & Poor’s 500 index futures dropped 5.70, or 0.5 percent, to 1,093.90, while Nasdaq 100 index futures fell 4.75, or 0.3 percent, to 1,807.00.
Meanwhile, earnings also remain a focus of investors. Wal-Mart Stores Inc. reported a fourth-quarter profit that topped analysts’ expectations. However, a key measure of sales showed its third consecutive quarterly decline. The retail giant’s shares dipped 82 cents to $53.24 in pre-opening trading.
Hewlett-Packard Co. reported a better-than-expected fiscal first quarter after the market closed Wednesday. The computer and technology company, which like Wal-Mart is a component of the Dow, also forecast full-year revenue and profit that exceeds analysts’ expectations. Its shares rose 15 cents to $50.27.
Stocks rose Wednesday after Deere & Co. and Whole Foods Market Inc. both reported strong profit, and the government said construction of new homes and industrial production rose more than anticipated in January.
This week’s rally comes on the strength of domestic growth, after weeks of concerns about potential overseas troubles derailing a global economic recovery. Investors have been worried debt problems in Greece and other European countries could spread and stymie a rebound. China’s move to tighten lending standards and slow its growth to avoid speculative bubbles has worried investors.
Meanwhile, bond prices rose Thursday after the unemployment report. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.71 percent from 3.74 percent compared late Wednesday.
The dollar mostly rose against other major currencies. Gold and oil prices fell.
Overseas, Japan’s Nikkei stock average rose 0.3 percent. Britain’s FTSE 100 rose 0.3 percent, Germany’s DAX index gained 0.1 percent, and France’s CAC-40 fell 0.1 percent.