The Day Ahead: Jobs Data, Fed Speak, ISM

It's a big day for macroeconomic news.  The official Employment Situation Report prints at 8:30am eastern.

Treasuries weakened overnight. The benchmark 10-year was recently quoted at 3.50% while the two-year note yield is up three basis points at 0.865%. FNCL 4.5 MBS coupons are -8/32 at 101-11.

Stocks are pointing upwards as investors anticipate two of the most important economic indicators on the month: nonfarm payrolls and the ISM manufacturing report.

S&P 500 futures are 6.25 points higher at 1,327.00 and Dow futures are 52 points higher at 12,304. Equities were volatile and finished modestly lower Thursday, but the Dow has risen 3.92% since March 26 and it rose 6.41% in the first-quarter.

Commodity prices are mixed: light crude oil rose 1.32% overnight to $106.72 per barrel while gold prices rose 0.3% to $1,434.60 per ounce.

Key Events Today:

8:15 - Charles Plosser, hawkish president of the Philly Fed, will speak on the U.S. economy and challenges for monetary policy makers.

8:30 - About 188,000 new jobs were created in March, the Nonfarm Payrolls Employment Report is expected to say. Such a figure would mark the sixth month of growing employment and be roughly in line with the 192k new jobs reported in February. That's the good news; the bad news is this pace "just isn't fast enough" to cut down the 8.9% unemployment rate, according to Reuters.

Economists at BTMU called this pace of labor growth "painfully slow," but noted that steady improvement continues across many sectors, just not a lot of them.

"Professional and business services, leisure and hospitality, and health care will be the strongest categories for private service sector jobs," said BTMU analysts, who predict +170k total growth including +187k private jobs with an assumed increase of +32k manufacturing jobs.

"Information, financial activities, and trade are expected to show little job growth," they added. "The government sector will continue to shed jobs, a theme that will stick all year, to the tune of -18K in March."

Economists at BMO are more optimistic.

"Look for a solid 230k increase in nonfarm payrolls," they wrote Friday. "Private payrolls should increase 250k - the most in five years - topping the prior month's 222k advance. Conversely, state and local government payrolls could shrink a further 20k amid aggressive budget cuts (and as some public workers retire early to lock-in pension benefits at risk of erosion)."

9:00 - Richard Fisher, Dallas Fed president, speaks on "Global Influence of Business in North Texas" 

10:00 - Regional surveys suggest continued strength in the ISM Manufacturing Index, a key nationwide survey of the industry. The market consensus expects to see a 61.0 score in March, a robust level as anything above 50 indicates growth. The survey hit a seven-year high of 61.4 in February. 

Regional surveys, notably New York's Empire survey, plus the Philadelphia and Richmond indexes, were so strong this month that the big question is whether the ISM will be growing at an exceptional pace or a merely great one, said economists at IHS Global Insight. 

"Since the regional surveys suggested that February should have been even better than the national reading of 61.4, any 'catching up' in March could make the ISM move even higher," they wrote. "Supply-chain problems after the Japanese earthquake threaten to cause the vendor performance reading (delivery delays) to spike, but it may be too early to see that effect this month."

10:00 - Construction Spending is forecast to decline 0.3% in February, following a 0.7% dip in January that was driven by a 6.9% nosedive in non-residential private construction spending. December's index was worse: -1.6%.
Economists at Nomura note that outlays for nonresidential structures in the private sector picked up in Q4 2010, marking the first quarterly advance since early 2008. They note that construction expenditures for offices and retail spaces may had bottomed out, adding that this report should be a good indicator of the underlying trend.

10:00 - William Dudley, president of the New York Fed, speaks in New York. After a run of hawkish rhetoric from hawkish Fed speakers, expect Dudley to hit the reset button and remind rate watchers of the long road to recovery that lies ahead.