February 1, 2018 / 2:05 PM / 8 months ago

US STOCKS-Wall St set to open lower on hawkish Fed, Microsoft's drop

* Microsoft down despite profit beats

* UPS falls as higher costs hurt profit

* Apple, Alphabet, Amazon to report after the bell

* Futures down: Dow 148 pts, S&P 8.75 pts, Nasdaq 28.5 pts (Adds details, comment, updates prices)

By Tanya Agrawal

Feb 1 (Reuters) - U.S. stocks were set to open lower on Thursday, weighed down by a drop in Microsoft and after the Federal Reserve raised its inflation outlook and flagged "further gradual" interest rate hikes.

Wall Street gave up early gains on Wednesday to finish marginally higher after the Fed kept rates unchanged, but struck a more hawkish tone than expected, no longer saying it expected price growth to stay below 2 percent.

"Janet Yellen, made pretty much clear in her last meeting (as Fed Chair) that the economy warrants more rate hikes," said Naeem Aslam, chief market analyst at Think Markets.

"The Trump administration's tax incentive plan has strengthened the inflation equation and this allows the Fed to move the interest rate to a more normal level."

Equity markets are torn between buoyant economic growth and double-digit company earnings, and the possibility that U.S. and euro zone central banks will tighten policy faster than expected, which is pushing up bond yields.

Benchmark 10-year U.S. Treasury yields held near four-year highs after the Fed's statement. Rising yields have pummeled the stock market through this week, despite strong corporate earnings report.

Indeed, Microsoft's shares fell 1.2 percent in premarket trading despite the after the software heavyweight beat quarterly profit forecasts. Some analysts said the company was coming into the report on very high investor expectations and a run up in its stock.

At 8:32 a.m. ET (1332 GMT), Dow e-minis were down 148 points, or 0.57 percent, with 52,480 contracts changing hands. S&P 500 e-minis were down 8.75 points, or 0.31 percent, with 227,399 contracts traded.

Nasdaq 100 e-minis were down 28.5 points, or 0.41 percent, on volume of 55,405 contracts.

Strong fourth-quarter reports from S&P 500 companies so far have pushed up analysts' profit growth estimate to 13.7 percent, from 12 percent at the start of the month. Nearly 81 percent of the companies in the index that have reported through Wednesday have beaten consensus estimates, Thomson Reuters data shows.

Shares of Facebook rose 2.2 percent after the company forecast rising ad sales despite a dip in usage.

But not all earnings reports from marquee companies on Thursday impressed.

UPS dropped 3.8 percent after the world's largest package delivery company reported a fourth-quarter net profit that was hurt by additional costs.

FedEx fell 0.8 percent. The two rivals are often seen as an indicator of U.S. economic activity and consumer spending.

EBay jumped 10.5 percent after posting higher revenue. But PayPal fell 7 percent after former parent eBay said it planned to move to a new primary payment processor.

Industry heavyweights Apple, Alphabet and Amazon are due to report results after the bell.

A report showed weekly jobless claims unexpectedly fell last week, pointing to a tight labor market and strong economy.

ISM manufacturing data for January and construction spending numbers for December are due 10 a.m. ET. The heavy economic data week will culminate in the Labor Department's nonfarm payrolls data for January on Friday. (Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza)

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