The financial markets are wary about an escalation in interest rates on a global basis. The European Central Bank raised its rates on Monday and Canada followed today. The Bank of Japan meets on Thursday, and the markets will be riveted on the outcome, as Japan has held its rates at zero for the past five years. If Japan acts too aggressively, global markets would turn bearish in the short term. Bond traders are also looking to Friday when U.S. employment figures for February are released. Substantial gains in non-farm payrolls could put additional upward pressure on Treasury yields, which move in the opposite direction of prices.

In addition, the St. Louis Fed president, William Poole, said last night that strong economic growth in the U.S. is worthy of the Fed's attention when it comes to inflation. Today Fed funds futures suggest that a 50-basis-point rate hike might be in the offing.

Revised fourth-quarter productivity and costs disappointed, with productivity declining for the first time since the first quarter of 2001. Productivity came in at a negative 0.5 percent, which was only a tad better than the original reading of minus 0.6 percent. Units labor costs -- output per hour worked -- were revised downward to 3.3 percent from 3.5 percent, but analysts were hoping for a revision to 3.1 percent.

On a year-over-year basis, productivity in 2005 was up 2.9 percent, the slowest since 2001, while costs rose 2.6 percent, the fastest increase since 2000. Increases in wages can spark fear of inflation that can also negatively affect corporate profits.

Stocks mixed, techs down

It was a tough day on Wall Street for a lot of sectors. Once again technology led the decline, with semiconductors in the forefront. Texas Instruments narrowed its forecast but disappointed the street, which was hoping for more. The chipmaker fell 3.3 percent on the session. This sent semiconductors, which have been struggling of late, into another decline. Intel was down 1.2 percent, and others followed. Telecoms and networkers also closed down, for the most part, as did home builders, oil, brokerages and gold.

The Dow Jones industrials managed to end in positive territory, led by GM with a 2.4 percent increase due to an announced freezing of its pension plan for U.S. workers beginning January 2007. Honeywell was the only other Dow component to close with a gain in excess of 1 percent, adding 1.3 percent on the day. AT&T lost another 1.8 percent on word of its purchase of BellSouth, and Alcoa fell 2 percent on interest-rate concerns.

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