US open: Stocks slip, volatility moderately higher

Thursday's batch of Federal Reserve speakers was not especially 'hawkish', but the Bank of England's unexpectedly 'hawkish' take on the outlook for interest rates appears to have rekindled some of the market's concerns regarding inflation and where rates may be headed - even in the medium-term.

Stocks initially started the day with a slight bid in the wake of the latest set of initial jobless claims, but that quickly evaporated.

Against that backdrop, as of 1500 GMT the Dow Jones Industrial Average was down 1.47% or 359.97 points at 24,553, alongside a fall of 1.15% or 30.82 points to 2,650.38 for the S&P 500 and a retreat of 1.27% or 89.57 points on the Nasdaq Composite to 6,960.19.

Ten-year US Treasury note yields on the other hand were again heading lower, trading half a basis point lower at 2.83% and off an intra-session high of 2.88%.

To take note of, 30-year fixed rate mortgages were also heading higher, averaging 4.32% over the week ending on 8 Febuary, up 10 points from the week before.

Elsewhere, the CBOE's VIX volatility gauge was gaining 7.18% to 29.72.

As expected, the UK's Monetary Policy Committee kept all its main policy settings unchanged, but according to analysts rate-setters may have opened the door to a hike in Bank Rate for as soon as its meeting in May.

Time will tell, but a fair bit of commentary was to be seen in the wake of the BoE's presser regarding the possibility of even two or three hikes in 2018. "The BoE were more hawkish than we expected today so we change our rate call. Governor Carney said the BoE needed to hike earlier and more than was priced. So we now expect a 25bp Bank Rate hike in May and another in February 2019. That is highly conditional. If Brexit transition talks drag past March or PMIs just remain where they are we will have reconsider," was the take from analysts at Bank of America-Merrill Lynch.

Back in the US, Thursday's weekly unemployment claims data, they revealed a 9,000 person decline to 221,000 for the week ended 3 February, to stand just above 45-year lows reported in mid-January. Economists had predicted the number of claims to rise to somewhere in the vicinity of 232,000.

Fedspeak, Treasury auction, mortgage rates draw attention

Regarding the latest Fedspeak, Philly Fed president Patrick Harker said he was open to hiking interest rates at the March meeting of the Federal Open Market Commmittee.

However, Harker's forecasts still called for only two hikes in 2018. He reportedly also called into question the outlook for inflation, saying that it might firm - or not.

Minneapolis Fed President Neel Kashkari said the US central bank was "a long way away" from raising interest rates due to further inflation caused by higher labour costs. Kashkari also said the January jobs report was actually only "mixed" in terms of wage growth.

"If you dig beneath the surface, wages went up a little but hours went down. And so it was not actually a resoundingly strong report in terms of the outlook for wages," he said. "We need to see that wages are going to go up consistently across the board. We need to see that that is actually going to translate into inflation."

Market participants were also keeping an eye on politics after Senate leaders announced a two-year budget deal late on Wednesday that still needed to pass the House. The deal, outlined by majority leader Mitch McConnell and minority leader Chuck Schumer, has been slammed by conservatives and would increase military and non-defence spending by $300bn and add more than $80bn in disaster relief.

According to analysts, news of the deal was the main factor behind the earlier rise in US bond yields.

Also on traders' radar, that same evening the US Treasury was set to auction $16bn of 30-year bonds, the largest sale at that maturity since 2015.

Tesla down, Philip Morris up

Meanwhile, in US corporate news, shares of Tesla had lost 5% to $339.54 after the electric car-maker posted its biggest ever quarterly loss less than 24 hours after Elon Musk chose to shoot his car into space. Tesla reported a loss of $675.4m, compared ti a loss of $121m in the same period a year ago.

21st Century Fox was also in focus, albeit trading just 1% lower at $35.96 per share after its quarterly earnings and revenue beat analysts' expectations. Revenue for the second quarter came in at $8.04bn versus expectations of $7.94bn, while adjusted earnings per share were 42 cents versus a forecast of 38 cents.

Social media giant Twitter posted its first net quarterly profit in history on Thursday, as rising sales of video advertising space across the microblog came shortly after had seriously slashed expenses in the previous quarter, swinging the President's personal soapbox to a net profit of $91.1m for its fourth trading quarter – a 154% improvement on the previous year's $167.1m loss.

Shares in Philip Morris on the other hand picked up 2.39% to $101.24 each in early trade despite the tobacco giant reporting an earnings-per-share that fell short of analyst expectations and a net income of $694m for the quarter, down 60% from the year-ago quarter

Investors were also sifting through earnings from CVS Health, Cardinal Health, Viacom, Teva and Yum Brands.

Dow Jones - Risers

Apple Inc. (AAPL) $159.96 0.26%
Exxon Mobil Corp. (XOM) $77.02 0.10%
Dowdupont Inc. (DWDP) $70.35 -0.35%
Merck & Co. Inc. (MRK) $55.62 -0.47%
Walt Disney Co. (DIS) $104.12 -0.61%
Procter & Gamble Co. (PG) $81.10 -0.91%
Unitedhealth Group Inc. (UNH) $223.77 -0.91%
Cisco Systems Inc. (CSCO) $39.94 -0.99%
United Technologies Corp. (UTX) $130.62 -1.02%
Chevron Corp. (CVX) $114.06 -1.07%

Dow Jones - Fallers

General Electric Co. (GE) $14.76 -3.25%
Intel Corp. (INTC) $43.81 -3.08%
Boeing Co. (BA) $337.65 -3.01%
Home Depot Inc. (HD) $185.94 -2.80%
Caterpillar Inc. (CAT) $150.10 -2.75%
Travelers Company Inc. (TRV) $138.57 -2.51%
Nike Inc. (NKE) $64.10 -2.33%
3M Co. (MMM) $228.21 -2.14%
JP Morgan Chase & Co. (JPM) $110.77 -1.86%
Johnson & Johnson (JNJ) $129.03 -1.82%

S&P 500 - Risers

Viacom Inc. Class B (VIAB) $33.58 10.06%
Fiserv Inc. (FISV) $137.53 6.47%
Cardinal Health Inc. (CAH) $67.89 4.23%
Southwestern Energy Co. (SWN) $3.72 3.33%
Essex Prty Trust Inc. (ESS) $224.29 2.98%
Philip Morris International Inc. (PM) $101.80 2.95%
Kellogg Co. (K) $65.97 2.74%
Interpublic Group of Companies Inc. (IPG) $21.85 2.58%
Discovery Communications Inc. Class A (DISCA) $23.69 2.49%
Omnicom Group Inc. (OMC) $77.24 2.47%

S&P 500 - Fallers

Hanesbrands Inc. (HBI) $20.00 -8.95%
Teradata Corp. (TDC) $37.29 -7.01%
Mattel Inc. (MAT) $15.98 -5.97%
Goodyear Tire & Rubber Co. (GT) $31.56 -5.71%
Newell Brands Inc (NWL) $27.81 -5.60%
United States Steel Corp. (X) $33.61 -4.87%
Hasbro Inc (HAS) $97.58 -4.54%
Ralph Lauren Corp (RL) $102.95 -4.41%
Borg Warner Inc. (BWA) $52.62 -4.33%
Prudential Fincl Inc. (PRU) $106.42 -4.27%

Nasdaq 100 - Risers

Fiserv Inc. (FISV) $137.53 6.47%
Cognizant Technology Solutions Corp. (CTSH) $77.28 0.99%
Liberty Global plc Series C (LBTYK) $34.64 0.64%
Mercadolibre Inc. (MELI) $345.47 0.56%
Check Point Software Technologies Ltd. (CHKP) $99.55 0.53%
Liberty Global plc Series A (LBTYA) $35.82 0.31%
Apple Inc. (AAPL) $159.96 0.26%
O'Reilly Automotive Inc. (ORLY) $252.53 0.18%
Amgen Inc. (AMGN) $177.40 -0.04%
eBay Inc. (EBAY) $42.27 -0.13%

Nasdaq 100 - Fallers

Take-Two Interactive Software Inc. (TTWO) $107.89 -7.93%
Tesla Inc (TSLA) $328.80 -4.70%
Hasbro Inc (HAS) $97.58 -4.54%
Workday, Inc. (WDAY) $113.49 -3.63%
T-Mobile Us, Inc. (TMUS) $59.97 -3.37%
NetEase Inc. Ads (NTES) $298.68 -3.34%
Lam Research Corp. (LRCX) $165.92 -3.33%
Applied Materials Inc. (AMAT) $47.13 -3.21%
Xilinx Inc. (XLNX) $64.87 -3.14%
Intel Corp. (INTC) $43.81 -3.08%