Thursday March 9th

9-03-2017

US stocks open flat after the ECB hold rates steady; Street looks ahead to jobs report

U.S. equities opened mostly flat Thursday as investors parsed through the latest monetary policy decision from the European Central Bank. The Dow Jones industrial average fell about 10 points, with IBM contributing the most losses. The S&P 500 held just below the flatline, with energy leading decliners and utilities outperforming. The Nasdaq composite also held marginally lower. The ECB kept interest rates unchanged, as was widely expected. President Mario Draghi said in a news conference that while some sentiment indicators suggest the region's recovery may be gaining steam, "measures of underlying inflation remain low." "If the outlook becomes less favorable, ... we stand ready to increase our asset purchase program in terms of size and/or duration," Draghi said. Sovereign bond yields across the globe ticked higher amid Draghi's remarks. The U.S. 10-year note yield hit its session high around 2.58 percent, while the 10-year German bund yield rose to near 0.41 percent. The euro rose about half a percent against the U.S. dollar to trade near $1.06. The dollar index, which measures the U.S. currency's performance against six other currencies, pulled back around a quarter of a percent. Draghi is "trying to straddle the line of acknowledging the better economic data, the uptick in headline inflation and that downside risks have diminished with saying that core inflation is still low, country reforms are still slow and he thinks 'present policy stance is appropriate,'" said Peter Boockvar, chief market analyst at The Lindsey Group, in a note. European equities traded mostly lower, with the pan-European Stoxx 600 index falling 0.1 percent. U.S. futures, meanwhile held around the flatline after the ECB's announcement and during Draghi's news conference. Investors also looked ahead to the February nonfarm payrolls report scheduled for Friday at 8:30 a.m. ET. On Wednesday, ADP and Moody's said private companies added 298,000 jobs last month, shattering estimates. Goldman Sachs and UBS subsequently raised their estimates for Friday's report following ADP's blowout number. Friday's report will be key for Wall Street as it looks for one more item confirming the Federal Reserve will raise rates next Wednesday. "Assuming the Fed reiterates its forecasts for three separate rate hikes in 2017, stocks will perform better if Janet Yellen pulls the trigger than by maintaining the status quo," said Jeremy Klein, chief market strategist at FBN Securities. "Stretched valuations along with the anticipation of Friday's employment numbers and next Wednesday's FOMC decision have sent some of the large institutions that have driven the broader indices higher during the past several weeks to the sidelines," he said. Market expectations for a rate hike next week have skyrocketed in recent weeks amid hawkish Fed rhetoric and solid economic data. According to the CME Group's FedWatch tool, March rate hike expectations were 90.8 percent. On the data front Thursday, initial jobless claims bounced back from 44-year lows, with import prices rising 0.2 percent. Asian equities finished in negative territory on Thursday after China's inflation data painted a mixed picture. The Shanghai composite closed down 0.74 percent or 24 points at 3,216.58 and the Shenzhen composite fell 0.73 percent or 14.7 points to finish at 2,009.55. Hong Kong's Hang Seng plunged 1.18 percent by 3:00 pm HK/SIN. Japan's Nikkei 225 finished up 0.34 percent or 64.5 points at 19,318.58 as the weaker yen spurred buying. Oil prices fell about 2 percent on Thursday, extending the biggest falls this year as record U.S. crude inventories kept sentiment weak, pointing to a global glut despite supply cuts. Crude oil stocks in the United States, the world's top oil consumer, surged last week to 528.4 million barrels, an all-time high and up 8.2 million barrels in a week, well above forecasts of a 2 million barrel build. Brent crude oil was down 79 cents a barrel, or 1.5 percent, at $52.32 by 8:15 a.m. ET (1315 GMT), after reaching an intraday low of $51.60, its lowest since December 1. On Wednesday, Brent fell $2.81 a barrel, or 5 percent, in its biggest daily price move this year. U.S. light crude was down 90 cents, or 1.8 percent, at $49.38, off a session low of $48.79. WTI plummeted 5.38 percent on Wednesday. Gold held steady on Thursday after the European Central Bank said it would leave interest rates unchanged at 0.0 percent. Spot gold was down 0.10 percent at $1,206.35 per ounce. Earlier in the session, it hit $1,202.70, the lowest since Feb. 1. U.S. gold futures eased 0.26 percent to $1,206.20. Gold futures hit $1,202.90 earlier, the lowest level since Feb. 1 when gold traded as low as $1,199.70.