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Briefing.com Summary:
*Oil prices are moving higher again, which has the equity futures market trading lower.
*Broadcom impressed with its earnings results and guidance, but the market is preoccupied with the Iran conflict.
*Q4 productivity was solid, but so were unit labor costs.
This week's roller-coaster activity is continuing this morning, and it features some downhill action. The go-to catalyst is the jump in oil prices that has been spurred by unconfirmed reports that Iran struck a tanker off the coast of Iraq and the knowingness that activity through the Strait of Hormuz is still mostly at a standstill.
WTI crude futures are up 3.1% to $77.00/bbl. That move has Treasury yields higher and equity futures lower.
Currently, the 2-yr note yield is up four basis points to 3.58%, and the 10-yr note yield is up six basis points to 4.14%. The S&P 500 futures are down 24 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 102 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 299 points and are trading 0.6% below fair value.
One can tell that the Iran situation is the market's main preoccupation only because Broadcom (AVGO) is up 5.0% after its impressive earnings report and outlook, yet that good news hasn't dictated the behavior of the equity futures market. If anything, it has helped mitigate some of the losses, but it hasn't sparked risk-on trading behavior.
The same goes for this morning's economic data.
Nonfarm business sector labor productivity increased 2.8% in the fourth quarter (Briefing.com consensus: 4.0%) following an upwardly revised 5.2% (from 4.9%) in the third quarter. Unit labor costs jumped 2.8% in the fourth quarter (Briefing.com consensus: 0.2%) on the heels of an upwardly revised 1.8% decline (from -1.9%) in the third quarter.
The key takeaway from the report is that the productivity increase itself was pretty solid, yet that consideration was offset by the comparable jump in unit labor costs that aren't going to help ease concerns about sticky inflation pressures.
Relatedly, import prices rose 0.2% month-over-month but were down 0.1% year-over-year. Excluding fuel, import prices were up 0.5% month-over-month and were up 1.2% year-over-year. Export prices, meanwhile, climbed 0.6% month-over-month in January and were up 2.6% year-over-year. Nonagricultural export prices increased 0.7% month-over-month and were up 2.7% year-over-year.
Initial jobless claims were unchanged at 213,000 for the week ending February 28. Continuing jobless claims increased 46,000 to 1.868 million for the week ending February 21.
The key takeaway from the report will be the continuing low level of initial jobless claims, which connotes a labor market that is slow to fire employees.
