The Day Ahead: Markets Shaky Ahead of ADP Jobs Data

After the mixed equity session yesterday stocks continue to drift ahead of key employment data and a comprehensive survey of the services, financial, and construction industries.

As of 7:00, Dow futures are 19.00 points to 10,496, extending the 12-point loss seen on Tuesday. S&P 500 futures are down 3 points to 1129.25, offsetting the 3.5-point gain yesterday.

Commodities are mixed with WTI Crude oil down 18 cents to $81.59 per barrel but Spot Gold up $3.75 to $1121.75 per ounce.

Also, in the wake of comments from a European Central Bank member who said the EU would not be rescuing Greece, the greenback rose and the euro initially sank but then rebounded.

“The comment by executive board member Jürgen Stark in Italy's Il Sole newspaper initially sent the euro reeling lower against the dollar--knocking it back as far as $1.4283--as investors worried that Greece's debt problem could force it to default,” reported the Wall Street Journal. “However, the single currency soon rebounded with some market analysts speculating that despite Mr. Stark's warning, some plan will eventually be hatched to ensure Greece's stability.”

Key Events Today:

8:15 ― The ADP Private Employment Report has held a shaky history throughout the recession, but just days ahead of what could be the first positive nonfarm payrolls report in two years, one can expect the report certainly won’t be ignored even if all who view it do so with a skeptical eye. The consensus is for 75k private jobs to be lost ― Friday’s report should be more positive as it includes growth in the public sector.

“For most of 2009, ADP employment declines were larger than payroll declines (hence the consensus forecast for a 75,000 drop in ADP employment versus a forecast for flat nonfarm payrolls),” noted economists at RDQ, who said market expectations for nonfarm payrolls can be sensitive to the ADP data. 

10:00 ― The ISM Non-Manufacturing Index  gets less attention than its manufacturing cousin because it has less of a history, even though this survey covers the services, finance, and construction sectors, which together make up almost 90% of the economy. In November the NMI unexpectedly fell to 48.7, indicating that after two months of growth there was a sluggish period in most of the economy (below 50 = contraction). In December the consensus is that the survey will return to growth but the 50.5 consensus prediction leaves much to be desired.

“Freight activity continued to move up through November, although rough weather temporarily may have disrupted some freight loadings in mid-December,” note economists at IHS Global Insight. “Financial markets maintained good positive momentum. However, employment conditions are still expected to be a drag on the composite index, with an employment index reading still tracking below 50.”

2:00 ― Considering the wealth of economic material presented over the weekend, the release of the FOMC Minutes should be reason for few headlines. Why read what Fed officials were thinking several weeks ago when more recent material is available? Not only that, but nothing significant occurred at the last meeting: all participants voted to keep the Fed Funds rate in the zero to 0.25% range.