It's a relatively quiet Friday morning, with limited action overnight. Asian markets pulled back modestly in the wake of yesterday's U.S. retreat and European markets are mixed, with modest changes at this point.
There are a few earnings reports of interest, with Costco (COST) trading lower by 4% after it reported disappointing earnings on in-line sales. Costco also confirmed it will increase annual membership fees by $5 for U.S. and Canada members in June. Discount retailer Big Lots (BIG) is ticking higher after it reported better-than-expected earnings and Q1 guidance, while also announcing a stock buyback and dividend increase.
With earnings season winding down, the focus will shift more squarely to the March 14-15 Federal Open Market Committee meeting and the high likelihood of a rate hike at that time. There will be plenty of Fed commentary for the market to digest today, with a full slate of Fed speakers on the docket today. Five Fed members are giving speeches over the course of the day, but Fed Chair Yellen's Economic Outlook at the Executives Club of Chicago at 1:00 pm ET today should be of greatest interest.
The probability of a rate hike in March now stands at 77%, up from around 30% a month ago. Over the past month Fed officials have increasingly touted the idea of a March rate hike, economic data has remained strong and inflation has ticked up toward the Fed's target. As rate expectations rose, the stock market also continued to climb to record highs, seemingly unafraid of the growing likelihood of a March hike.
Of course we'll get some influential data between now and the March Fed meeting, most importantly next Friday's Employment Report for the month of February. As long as there's not a major negative surprise with regard to Average Hourly Earnings or Nonfarm Payrolls, we'd expect the March rate hike outlook to solidify around the data.