Updated from 9:24 a.m. EST.
The market was having growing pains this morning. After spurting higher through most of January on the
Federal Reserve's first interest rate cut and expectations of the follow-up cut that came yesterday, stocks look ready to take a rest.
Some said a market pullback following Wednesday's highly expected half-point rate cut was more than certain. The
Nasdaq had already risen some 24% for the year through Tuesday, a robust gain for a one-month window. This morning, it was up 2 to 2774.
Dow Jones Industrial Average was 16 higher to 10,902. The S&P, meanwhile, was inching fractionally higher to 1367.
The rate cut also reminded investors that
recession fears loom -- that the economic slowdown and earnings smashup of the past several months is what got the Fed cutting the cost of borrowing in the first place. And this situation isn't yet over.
There is some reason for optimism. The Fed yesterday maintained its so-called easing bias, indicating more interest rate cuts are expected to come in the near term. The March
fed fund futures contract -- which gauges market expectations of upcoming Fed interest rate action -- is now fully priced for a 50 basis-point rate cut either before or at the next Fed meeting on March 20. It's also pricing in an 80% probability of a rate cut before March 1, which would be another intermeeting move if it were to happen. But another intermeeting move is less certain.
Unlike January, when the market rose on expectations of imminent rate cuts, it may now concentrate mostly on economic reports in the coming weeks to gauge the Federal Reserve's thinking.
There's plenty of data to watch today. Already out this morning,
initial jobless claims for the week ended Jan. 27 rose to 346,000, ahead of forecasts for 331,000 and up from the previous week's 316,000.
Personal income and consumption for December showed that growth in income remained at 0.4%. Personal income was expected to rise only 0.2%, but instead came out in line with previous month's 0.4% jump. Some recent data has show that certain prices -- and consumer wages -- are rising and threatening to give a nod to inflation even though the economy is slowing. But the Fed and most economists have indicated that inflation is well under control and is not a the primary concern right now.
Personal consumption rose 0.3%, beating expectations of a 0.2% climb, also in line with previous month's 0.3% figure. Spending on services rose due to higher energy costs, while spending on cars fell sharply, indicating stress on consumer pocketbooks and their willingness to spend.
But today's key number is released at 10:00 a.m. -- January's
Purchasing Manager's Index, or PMI, is a manufacturing index based on a survey of purchasing executives at roughly 300 industrial companies, and economists polled by
were expecting a reading of 43.6 versus 43.7 in December. The PMI signals expansion when above 50 and contraction when below. Manufacturing is the sector that has suffered most drastically in recent months, and some credit the last PMI report for the Fed's first intermeeting rate cut.
The components of the PMI include new orders, production, employment, supplier deliveries, inventories, prices, new export orders, imports and backlog of orders. The employment index is used to help predict manufacturing employment.
And corporate layoffs continue to spread like a Colorado wild fire. This morning, a couple of major European companies that trade as ADRs on the NYSE announced job cuts. Europe's biggest bank,
today announced plans to cut 2,600 jobs, or 3% of its workforce, as part of a restructuring. It reported weak fourth-quarter earnings.
And Anglo-dutch steelmaker, the
said it will eliminate 6,050 jobs in the next two years, mostly in the U.K.. The company also plans to slash 20% in a bid to end mounting losses.
Layoffs have hit a bevy of U.S. companies in the past few weeks. U.S. telecom
, media titan
have all announced job cuts recently.
And the California energy crisis limps along. The California assembly rejected the state's emergency power bill yesterday because it would have sharply increased already sky-high electricity rates. The rejection threatens passage of the legislation, which would have allowed the state to enter contracts to buy power for
Pacific Gas & Electric and
Southern California Edison, which are headed for bankruptcy.
But the balance of corporate news since the market closed yesterday has been relatively favorable. Online music service
, software manufacturer
and electronics manufacturing services provider
all beat analyst expectations about earnings. WebMethods even turned a profit for the first time ever.
More earnings out today include
, consumer-products maker
, mobile phone maker
and sneaker giant
. Sprint PCS met
fourth-quarter earnings expectations and was 1% higher.
TheStreet.com writes exhaustively about earnings, so check our site regularly to keep up to speed.
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Bond prices were narrowly higher this morning after rising on the Fed interest rate cut yesterday. The benchmark 10-year
Treasury note was lately up 2/32 at 104 30/32, yielding 5.09%.
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European markets were shuffling lower as they neared midsession.
was lately down 54.00, or 0.9%, to 6243.50. Across the channel, Paris'
was tumbling 106.52, or 1.8%, to 5891.97. Frankfurt's
was off 72.20, or 1.1%, to 6722.94.
The greenback rally against the euro for a second day after hitting a one-month low against the currency on Jan 29. The greenback was lately trading at 0.9405 euro.
Asian markets were mixed overnight.
Tokyo stocks ended lower overnight. The key
closed down 64, or 0.5%, to 13,779.55.
Hong Kong stocks rebounded overnight, and the key
rose 61.64, or 0.4%, to 16,163.99.
The dollar was lately trading at 115.685 yen.
For more on world stock markets, check out
global indices information.
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