The Day Ahead: ADP Employment Report; ISM Non-Manufacturing; Fed Speak
Benchmark yields shot lower on the Japanese open last night but have since backed up a few bps as traders trimmed profits and balanced positions ahead of BLS jobs data this Friday. We'll get a muddled preview of that report this morning when the ADP Employment Report prints at 8:15am.
The 10-year note is currrently -2/32 at 103-01 yielding 3.258% and the 2s/10s curve is 1bp steeper at 264bps wide. The FNCL 4.5 MBS coupon is -2/32 at 102-29.
The stock market continues to struggle for direction as investors look ahead to the ADP private jobs report for guidance. S&P futures are down 1.25 points to 1,350.75 and Dow futures are 18 points lower at 12,740. Economists at BMO point out the losses are mild compared to the sharp drop-off in Asia- China's market fell 2.23% and Hong Kong shares shed 1.35%, while Japan's market remained closed.
Key Events Today:
8:00 - Eric Rosengren, president of the Boston Fed, speaks to the NAIOP (the Commercial Real Estate Development Association) in Boston.
8:15 - The growth of private jobs is expected to be trimmed a bit in April. Forecasts for the ADP Employment Report find a median at 195k, versus 201k new jobs in March and 208k in February. Forecasts range from 165k and 240k.
In part because of this report's volatility, economists don't generally provide commentary for their forecasts on the ADP figures, but a surprise in either direction can cause last-minute revisions to forecasting Friday's nonfarm payrolls report.
10:00 - Like its manufacturing cousin, the ISM Non-Manufacturing Index has been particularly robust in recent months. A key measure of the services, financial, and construction industries, this survey has reported readings of 59.4 and 59.7 in January and February, then 57.3 in March. Economists look for a marginal reduction to 57.0 in April, but only 50 is required to show growth.
"The services industry seems to be having its day, an assessment supported by the 9.3% annualized increase in software investment recorded during the first quarter, as well as earnings trends from the likes of healthcare and IT providers, sectors in which companies have experienced sales growth of 5% and 20%, respectively," said economists at Janney Capital Markets. "Moreover, the services sectors are less sensitive to higher commodities costs, an area which has taken on greater importance in recent months."
3:00 - John Williams, president of the San Francisco Fed, gives his first policy speech on maintaining price stability in a global economy, in Los Angeles.
7:00pm - Dennis Lockhart, president of the Atlanta Fed, speaks on the economic outlook to the National Funding Association in Atlanta.