U.S. stocks are set for a lower open as investors cheer a big earnings beat from giant retailer Walmart but also price in the prospect of higher interest rates and a resulting dive in oil prices and a stronger dollar.
A better-than-expected quarterly profit report from Walmart offset some of the market's lingering weakness sparked by the Federal Reserve on Wednesday letting investors know that an interest rate hike might occur in June if U.S. economic data continues to strengthen.
In pre-market trading the Dow Jones industrial average was down 30 points, or 0.2%, after finishing down 3 points Wednesday in a volatile session following the release of the mintues of the Fed's April meeting.
Walmart (WMT) bucked the trend of many U.S. retailers this profit-reporting season, reporting that its earnings, revenues and sales all handily topped Wall Street's estimates. Shares of the retailer, which is a Dow component, jumped almost 9% in pre-market trading, buoyed in large part by Walmart raising its sales forecast for the current quarter. Walmart's strong results debunked fears that the U.S. consumer is cutting back spending in a major way.
Wall Street, however, was also eyeing another rise in the U.S. dollar, which is a headwind for U.S. multinationals as it makes American-made products sold abroad more expensive, which tends to hurt sales and crimp earnings. The Wall Street Journal dollar index edged higher again Thursday versus a basket of foreign currencies, hitting itshighest level since late March.
Commodity prices, including U.S.-produced crude, has been another casualty of the Fed surprising markets with word that they are seriously considering there second rate hike since 2006 at its meeting next month. U.S. oil was down nearly 2% in Thursday trading to $47.26.
Investors were also eyeing the circumstances surrounding the crash of Egypt flight 804, which crashed en route from Paris to Cairo overnight. French officials said that no hypothesis for the cause of the crash can be ruled out.
The Fed's decision to prepare financial markets for a rate hike caught Wall Street by surprise, as the market at the start of the week had been pricing in virtually zero chance of a rate hike in June. However, the odds of a June hike now have crept up to 34% early Thursday, according to CME.
Global stock markets have traded wobbily overnight. In Japan the Nikkei 225 finished virtually unchanged. Shares fell 0.7% in Hong Kong. And stocks in mainland China also finished flat.
In Europe, shares were lower but off their lows. The broad Stoxx Europe 600 index was off 0.5%. The German DAX was off 0.9% and the CAC 40 in Paris was down 0.6%.
