A 'soft start for stocks
Disappointing results for Microsoft has stock futures lower ahead of latest readings on economic growth, inflation pressures.
April 28, 2006: 6:24 AM EDT
NEW YORK (CNNMoney.com) - Disappointing results from Microsoft could give stocks a rough start Friday, when investors will also get the latest reading on the state of the U.S. economy.
U.S. stock futures were down in early trading, indicating a lower open for U.S. markets, particularly the tech-heavy Nasdaq, after Microsoft posted earnings after the close Thursday that fell short of forecasts.
At 8:30 a.m. ET (13:30 em Portugal), the government will release its latest readings on the gross domestic product and the Employment Cost Index for the first quarter. The GDP, the broad measure of the nation's economic activity, is forecast to post annual growth of 4.9 percent in the quarter after only a 1.7 percent rise in the fourth quarter. The so-called chain deflator, the inflation measure that is part of the GDP report, is expected to be up only 2.7 percent, after a 3.9 percent rise in the fourth quarter.
But that strong pace of growth has raised concerns that the Federal Reserve could continue to raise interest rates after its May 10 meeting in order to make sure there isn't a pick-up in inflation. But comments from Fed Chairman Ben Bernanke Thursday in congressional testimony that the inflation outlook is "reasonably favorable" helped calm those concerns and lift U.S. stock and bond markets, taking the Dow to a new six-year high.
One of the reasons hotter growth can cause inflation is if a tighter job market leads to higher labor costs for employers and more money in the pockets of consumers. The Employment Cost Index, a separate government report due out Friday, is forecast to be up 0.9 percent in the first three months of the year, following a 0.8 percent gain in the fourth quarter.
Oil prices were down after Thursday's sell-off, when an increase in Chinese interest rates cut the prospects for demand from that major oil consumer.
The June light crude futures contract for NYMEX was down 36 cents to $70.61 in electronic trading, while the June contract for Brent crude lost 39 cents to $70.52.
Major markets in Asia closed mostly lower Friday, as Sony's (Research) guidance of lower profits after the market close Thursday hit results. Major European markets also were down in early trading.
Treasury prices were lower, lifting the yield on the benchmark 10-year note to 5.09 percent from the 5.07 percent level reached late Thursday. The dollar was lower against the euro and little changed against the yen.
In other corporate news, President Bush told reporters Thursday that he will push to have Congress give him authority to raise fuel economy standards on all cars, a move that could put more pressure on U.S. automakers such as General Motors (Research) and Ford Motor (Research).