The US stock market opened lower on Thursday following weaker-than-anticipated economic data.
Thursday, February 26, 2015
Consumer prices in January experienced a decline, weekly unemployment ticked higher and inflation was weaker than this time last year. Deflation has a complex effect on the market – real wages could increase, but the Federal Reserve may raise doubts regarding an interest rate hike.
All three major US indices edged lower to open Thursday’s session. The S&P 500, Nasdaq and Dow were all down close to 0.1% in early trading.
Investors contemplate disappointing data
The Labor Department released January’sconsumer-price index, reported The Wall Street Journal. The index dropped 0.7% from December to January and 0.1% year-over-year – the first such decline since October 2009. Most economists expected a 0.6% monthly dip. The decline in oil prices was the primary reason for falling inflation over the past year.
Meanwhile, unemployment claims for the week ending February 21 ticked higher by 13,000 to reach 313,000 in total. Once again, the mark was worse than analysts’ prediction – most expected only 290,000 new jobless claims.
“Markets, especially on the equity side, have become dependent on central bank stimulus,” Chris Gaffney, senior market strategist at EverBank Wealth Management, told The Wall Street Journal. “Keeping interest rates low and putting additional liquidity in the market certainly creates an environment that’s very good for corporations.”
Not all the news was negative. Durable goods orders gained 2.8% in January over December, which was 0.6% higher than economists predicted. Additionally, analysts remain positive that the Federal Reserve will boost interest rates sooner rather than later. An increase in wages would impact the chances of a rate hike – to that end, Wal-Mart announced plans to boost its workers’ pay. That move would likely pressure competitors to do the same and could influence the Fed’s stance toward interest rate hike timing.
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