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Caterpillar falls as Q4 profit declines
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U.S. labor costs growth slows in fourth quarter
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Pfizer forecasts weak 2023 sales of COVID products
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Fed decision on interest rates on Wednesday
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Futures up: Dow 0.29%, S&P 0.37%, Nasdaq 0.37%.
(Adds comments, updates prices throughout)
By Johann M Cherian and Shreyashi Sanyal
Jan 31 (Reuters) - U.S. stock indexes were set to open
higher on Tuesday after wage growth data pointed to easing
inflation ahead of the Federal Reserve's decision on interest
rates.
U.S. labor costs increased less than expected last quarter
as wage growth slowed, suggesting that the central bank's
aggressive approach to taming inflation was taking hold.
The Fed will make its decision on rates on Wednesday, with
traders betting on a 25-basis-point hike (bps) at the end of the
its two-day meeting, and a terminal rate of 4.9% in June. "As the Fed meeting begins today, they'll be looking at
every index that could give them a better judgment on inflation
and this is one of them," said Peter Cardillo, chief market
economist at Spartan Capital Securities LLC.
"Labor costs are still high, but this means costs have come
down, and that's a key factor for future wage inflation."
Futures were lower earlier in the day after
disappointing earnings and forecasts from bellwethers including
Caterpillar, McDonald's and Pfizer set a cautious tone for the
busiest earnings week this season.
Caterpillar Inc fell 0.7% as the heavy equipment
maker reported a drop in quarterly profit on higher
manufacturing costs.
McDonald's Corp beat Wall Street estimates for quarterly comparable sales, but the fast-food chain's shares fell 1.9% as it warned of short-term inflationary pressures. Pfizer Inc slid 2.7% after the drugmaker's full-year revenue outlook for its COVID-19 products fell short of expectations. "With additional earnings coming in this week, participants are a little concerned that the market got a little bit ahead of itself and so are a little cautious heading into the Fed meeting," said Robert Pavlik, senior portfolio manager at Dakota Wealth. Wall Street started the year on a strong footing and is set to end January higher, with the Nasdaq up nearly 9% as growth stocks attracted investor attention earlier in the month. Higher rates tend to pressure the valuations of tech and other high growth stocks.
The U.S. 10-year Treasury yield fell after the labor costs data, and was last at 3.50% compared to 3.55% on Monday.
At 8:52 a.m. ET, Dow e-minis were up 97 points, or 0.29%, S&P 500 e-minis were up 15 points, or 0.37%, and Nasdaq 100 e-minis were up 44 points, or 0.37%.
General Motors Co jumped 5.1% on strong full-year profit expectations.
The world's largest parcel delivery firm United Parcel Service also added 1.9% on strong quarterly earnings.
As many as 140 S&P 500 companies reported earnings for
the fourth-quarter by Monday. Overall earnings are expected to
have fallen 3% this quarter compared with the prior-year,
according to Refinitiv data.
(Reporting by Johann M Cherian and Shreyashi Sanyal in
Bengaluru
Editing by Vinay Dwivedi and Saumyadeb Chakrabarty)
