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Lingering Interest Rate Worries May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to give back ground following the rally seen to close out an extremely volatile week last Friday.

Lingering concerns about the outlook for monetary policy may weigh on Wall Street, as the Federal Reserve has indicated it plans to begin raising interest rates as soon as its next meeting in mid-March.

CME Group's FedWatch tool currently points to an 80.8 percent chance the Fed will raise rates by 25 basis points in March and a 19.2 percent chance of a 50 basis point rate hike.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the Labor Department's closely watched monthly jobs report on Friday.

Economists currently expect employment to increase by 155,000 jobs in January after rising by 199,000 jobs in December. The unemployment rate is expected to hold at 3.9 percent.

The strength of the monthly jobs data could impact expectations regarding how fast the Fed will raise rates from near-zero levels in an effort to fight inflation.

Reports on manufacturing and service sector may also attract attention in the coming days along with preliminary data on labor productivity and costs in the fourth quarter.

Earnings news is also likely to be in the spotlight this week, with Exxon Mobil (XOM), UPS (UPS), Alphabet (GOOGL), General Motors (GM), Amazon (AMZN), Ford (F) and Meta Platforms (FB) among a slew of companies due to report their quarterly results.

Continuing the rollercoaster ride seen throughout the week, stocks showed a significant turnaround over the course of the trading session on Friday. The major averages came under pressure to start the day but rebounded strongly to end the day sharply higher.

The major averages all posted strong gains for the day, with the tech-heavy Nasdaq leading the rally. While the Nasdaq spiked 417.79 points or 3.1 percent to 13,770.57, the S&P 500 surged 105.34 points or 2.4 percent to 4,431.85 and the Dow jumped 564.69 points or 1.7 percent to 34,725.47.

With the rally on the day, the major averages managed to close higher for the extremely volatile week. For the week, the Dow advanced by 1.3 percent, the S&P 500 climbed by 0.8 percent and the Nasdaq inched up less than 0.1 percent.

The substantial rebound seen over the course of the trading day may partly have reflected bargain hunting, with the Nasdaq and the S&P 500 bouncing off multi-month closing lows.

Tech giant Apple (AAPL) helped to lead the way back to the upside, spiking by 7 percent after reporting better than expected quarterly results.

Credit card giant Visa (V) also moved sharply higher after reporting fiscal first quarter results that exceeded analyst estimates on the top and bottom lines.

On the other hand, shares of Chevron (CVX) came under pressure after the energy giant reported fourth quarter earnings that missed analyst estimates.

Fellow Dow component Caterpillar (CAT) also moved notably lower as supply chain concerns overshadow the construction equipment maker's better than expected quarterly results.

Traders were also digesting a report from the Commerce Department showing core consumer price growth accelerated to a nearly 40-year high in December.

The Commerce Department's reading on inflation, which is said to be preferred by the Federal Reserve, showed the annual rate of core consumer price growth accelerated to 4.9 percent in December, reaching the highest level since September 1983.

At the same time, the report also showed personal spending fell by 0.6 percent in December after rising by 0.4 percent in November. The decrease in spending matched economist estimates.

Excluding price changes, real personal spending tumbled by 1.0 percent in December after slipping by 0.2 percent in the previous month.

"Even assuming a bounce-back for each of the three months of the first quarter, which seems unlikely given that Omicron and the child tax credit expiry will weigh on spending in January, the devastatingly weak end to the previous quarter means that we expect first-quarter real consumption growth to be unchanged overall," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

"Add in a slower pace of inventory accumulation, and we currently have first-quarter GDP growth tracking at -0.5% annualized," he added. "To our minds, despite the strength of price and wage inflation, it is disappointingly weak real economic growth that will prevent the Fed from delivering a full-blown Ratemaggedon this year."

Software stocks moved sharply higher over the course of the session, driving the Dow Jones U.S. Software Index up by 3.5 percent.

Substantial strength also emerged among biotechnology stocks, as reflected by the 3.3 percent spike by the NYSE Arca Biotechnology Index. The index rebounded after ending the previous session at its lowest closing level in well over a year.

Commercial real estate stocks also turned in a strong performance on the day, resulting in a 3.2 percent surge by the Dow Jones U.S. Real Estate Index.

Telecom, housing, retail and healthcare stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are rising $0.43 to $87.25 a barrel after inching up $0.21 to $86.82 a barrel last Friday. Meanwhile, after falling $8.40 to $1,786.60 an ounce in the previous session, gold futures are climbing $4.10 to $1,790.70 an ounce.

On the currency front, the U.S. dollar is trading at 115.43 yen versus the 115.26 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1171 compared to last Friday's $1.1151.

Asia

Asian stocks followed Wall Street higher on Monday as tech stocks rebounded from recent string of losses. Investors shrugged off data showing that China's manufacturing sector expanded at a slower pace in January amid Covid-19 outbreaks in the country.

Chinese and South Korean markets were closed for the Lunar New Year holiday. Hong Kong's Hang Seng iIndex jumped 1.1 percent to close at 23,802.26, with technology stocks leading gains. Hong Kong markets will be closed from February 1 to February 3 and will resume on February 4.

Japanese shares rallied after Prime Minister Fumio Kishida said he is not yet considering declaring a state of emergency for Tokyo over a recent spike in novel coronavirus cases.

The Nikkei 225 Index jumped 284.64 points, or 1.1 percent, to 27,001.98, with chipmakers, Sony and SoftBank Group leading the gainers. The broader Topix closed 1 percent higher at 1,895.93.

Alps Alpine, the maker of car navigation systems, soared 17.4 percent after raising its annual operating profit forecast. Transport company Mitsui OSK Lines spiked 9.6 percent after reporting earnings.

Japan's factory output shrank for the first time in three months in December, while retail sales posted their third straight month of year-on-year gains in December, data released earlier in the day showed.

Australian markets fell slightly as investors awaited cues from the Reserve Bank of Australia meeting on Tuesday. The central bank is expected to end its extraordinary monetary stimulus, upgrade its economic forecasts and potentially bring forward its interest-rate guidance in its first policy meeting of the year.

The benchmark S&P/ASX 200 Index dipped 16.50 points, or 0.2 percent, to 6,971.60, while the broader All Ordinaries Index finished marginally higher at 7,268.30.

Banks and miners led the losses. Banks Westpac, NAB and ANZ tumbled 2-3 percent, while mining heavyweights BHP and Rio Tinto dropped 1.2 percent and 1.9 percent, respectively. Tech shares bucked the weak trend, with Xero and Wisetech Global climbing 3-5 percent.

Europe

After moving to the upside earlier in the session, the major European markets have turned mixed over the course of the trading day on Monday.

After U.S. wage growth figures came in lower than expected, investors are now looking ahead to the U.K. and European central bank meetings this week for more clues on the outlook for monetary policy.

While the French CAC 40 Index has edged down by 0.1 percent, the U.K.'s FTSE 100 Index is up by 0.1 percent and the German DAX Index is up by 0.5 percent.

Vodafone has shown a substantial move to the upside after partnering with Intel to develop OpenRAN network technology. Recruiter SThree has also soared after its annual profit nearly doubled.

Swiss drug maker Roche has also advanced after the FDA approved Vabysmo, the first bispecific antibody for the eye, to treat two leading causes of vision loss.

KPN, the largest telecom provider in the Netherlands, has also moved higher after hiking dividend and announcing a new share buyback program.

Meanwhile, Ryanair Holdings has dipped. The airline has warned of a "hugely uncertain" financial outlook after posting a loss of 96 million euros ($107 million) for the final three months of 2021.

Italian energy services group Saipem has plunged after issuing a profit warning and withdrawing an outlook given in October.

U.S. Economic Reports

MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of January at 9:45 am ET. The Chicago business barometer is expected to edge down to 62.5 in January from 63.1 in December, although a reading above 50 would still indicate growth.

At 11:30 am ET, San Francisco Federal Reserve President Mary Daly is due to participate in a Refinitiv Breakingviews Predictions 2022 virtual discussion on the economy, inflation challenges and the post-pandemic job market.

Kansas City Federal Reserve President Esther George is scheduled to speak on the economic and monetary policy outlook before a hybrid Economic Club of Indiana event at 12:40 pm ET.

Stocks In Focus

Shares of BlackBerry (BB) are seeing significant pre-market weakness after the communications software company announced an agreement to sell substantially all of its non-core patent assets to Catapult IP Innovations for $600 million.

Cloud computing company Citrix Systems (CTXS) may also move to the downside following reports Elliott Management Corp and Vista Equity Partners are close to acquiring the company for $104 per share, which is below Citrix' closing price of $105.55 per share on Friday.

On the other hand, shares of Beyond Meat (BYND) are likely to see initial strength after Barclays upgraded its rating on the producer of plant-based meat substitutes to Overweight from Underweight.

Streaming giant Netflix (NFLX) may also move to the upside after Citi upgraded its rating on the company's stock to Buy from Neutral.

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