Fed Hawkish Tone Sends Futures Down

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U.S. stock index futures eased back on Thursday following the Federal Reserve raising its inflation outlook and warning of “further gradual” interest rate increases,

Wall Street gave up early gains on Wednesday to finish a bit higher after the Fed left interest rates unchanged.  However, the Fed struck a more hawkish tone than anticipated, as it doesn’t expect price growth to remain below 2 percent any longer.

Equity markets are undecided between upbeat economic growth and double-digit company earnings, and the likelihood that U.S. and euro zone central banks will tighten policy earlier than expected, the force behind the increasing bond yields. U.S. Treasury yields lingered near four-year highs following the Fed’s statement. But, the rise in yields has weighed down the stock market regardless of strong corporate earnings.

Microsoft’s shares shed 0.75 percent during premarket trading even though the company surpassed quarterly profit forecasts.  Analysts anticipate a fourth-quarter S&P 500 earnings growth of 13.7 percent, an increase from the previous 12 percent from the beginning of month. To date, over 80 percent of the companies in the index that have reported surpassed estimates.

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At 7:08 a.m. EST, Dow e-minis were down 15 points, or 0.06 percent, with 34,317 contracts traded.  S&P 500 e-minis were up 2.25 points, or 0.08 percent, with 159,903 contracts traded, while Nasdaq 100 e-minis were down 8 points, or 0.11 percent, on volume of 37,715 contracts.


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Among other earnings, Facebook gained 1.9 percent following the company’s forecast of increased ad sales even with a decline in usage.

eBay surged 10.5 percent after reporting higher revenue, while PayPal dropped 7 percent after its former parent company eBay signed a deal with a new primary payment processor.

AT&T gained 3.6 percent after reporting that its quarterly profit beat estimates and demonstrated confidence that the $85.4 billion acquisition of Time Warner will come into fruition.

Industry heavyweights Apple, Alphabet and Amazon are due to report results after the close.

A report on weekly jobless claims is due 8:30 a.m. EST. ISM manufacturing data for January and construction spending numbers for December are also due 10 a.m. EST.

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