Investing.com - Wall Street stock futures pointed to a lower open on Monday odds for a rate hike by the Federal Reserve (Fed) at next week’s policy meeting ratcheted up and investors positioned for Friday’s jobs report.
The blue-chip Dow futures retreated 40 points, or 0.19%, by 6:58AM ET (11:58GMT), the S&P 500 futures lost 6 points, or 0.26%, while the tech-heavy Nasdaq 100 futures fell 11 points, or 0.20%.
After Fed chair Janet Yellen said Friday that a rate hike "would likely be appropriate" this month if employment and inflation continued to evolve in line with expectations, markets and experts have become convinced that the first policy tightening will occur at the March 14-15 policy meeting.
Fed fund futures are currently pricing in an 84% chance of hike next week, according to Investing.com's Fed Rate Monitor Tool.
Analysts have also widely been penciling in a move. In its Global Economic Weekly report, Barclays said it now expects the Fed to hike rates at its March 14-15 meeting and again in September and December.
“As U.S. data have been solid but not exceptional, we believe the shift is driven by the improvement in financial conditions – specifically, the rally in equity markets – since the election, a rally that is evident to a greater or lesser degree in most major markets,” the report said.
UBS also said that Yellen’s speech convinced them to increase their expectations to three hikes this year in March, July and December.
Deutsche Bank also admitted that it was now looking for a move at this month’s meeting, stating that “the Fed has become less concerned about inflation, as the growth rate of the core PCE deflator (1.7%) is only a tenth below policymaker’s year end 2017 forecast.”
With the employment report out next Friday, economists at ING expect a “massive rebound” in wage growth. They forecast a 2.9% annual growth in average hourly earnings, even higher than the consensus estimate for 2.8%.
“That’ll be the icing on the cake for a March Fed hike,” they concluded.
To further take the pulse of the U.S. economy, January factory orders will be released at 10:00AM ET (15:00GMT) Monday in a light day for data.
Minneapolis Fed president Neel Kashkari, one of the more dovish voting members at the U.S. central bank, will give a speech on the outlook at 3:00PM ET (20:00GMT).
In company news, General Motors (NYSE:GM) grabbed headlines as the U.S. automaker confirmed its exit from the European market with the sale of its Opel division to PSA Group (PA:PEUP) for €2.2 billion euros ($2.3 billion).
Meanwhile, oil prices edged lower on Monday, starting the week off in negative territory amid concerns over rising production and swelling stockpiles in the U.S.
Data from oilfield services provider Baker Hughes released late Friday revealed that the number of active U.S. rigs drilling for oil rose by 7 in the prior week, the seventh weekly increase in a row. That brought the total count to 609, the most since October 2015.
U.S. crude futures fell 0.71% to $52.95 by 7:01AM ET (11:01GMT), while Brent oil lost 0.73% to $55.49.
Oil was also under pressure from concern over growth in China. Chinese Premier Li Keqiang announced over the weekend that the Asian giant aimed to expand its economy by only “around” 6.5% this year. The target for the world’s second largest economy in 2016 had been a larger 6.5% to 7%, with China achieving a 6.7% expansion last year.
Also in headlines overseas, investors were keeping a close eye on the French presidential race and its implications for the euro. Former prime minister Alain Juppe said Monday that he had decided "once and for all" not to run in France's presidential election.
The development dashed the hopes of many in his conservative party whose existing, scandal-hit candidate, Francois Fillon, faces almost certain defeat.
A poor showing from Fillon would leave favorite and centrist Emmanuel Macron to fight out the second round on May 7 with far-right leader Marine Le Pen. Polls have shown that Juppe as a candidate would have made the second round comfortably.