Surprisingly favorable labor market data on the home front ahead
of Friday's key government jobs report is a main positive indicator
this morning, likely offsetting some of the negativity from the
sub-par manufacturing ISM report earlier this week. Also providing
a favorable backdrop for today's trading action are announcements
of monetary easing from three major central banks.
We have the service-sector ISM reading on deck for release a little
later, but I would think that this morning's positive labor reports
will be reassuring enough to offset any surprises from that
???We have a lot of central bank action this morning, with
authorities in the U.K., the Euro-zone, and China announcing easing
measures. The European Central Bank (ECB) rate cut announcement was
largely expected, the Bank of England's expansion of its
bond-purchase program wasn't much of a surprise either, but the
Chinese action is not only surprising but likely indicative of the
authorities' concern at the pace of deterioration in the economy.
Let's hope that the market finds China's second rate cut in less
than a month reassuring and not a sign of panic.
But the bigger news today is on the domestic labor front, where we
got two favorable jobs reading this morning. Reversing the
negative trend of the last two months, the monthly jobs
report from Automatic Data Processing (ADP ) came in better than
expected. Since the ADP report tries to preview the monthly labor
market report from the government's Bureau of Labor Statistics
(BLS), this morning's positive read from the ADP will raise hopes
of a positive print from the BLS tomorrow.
For June, the ADP report is showing better than expected
private-sector jobs of 176K, and the tally May was modestly revised
upwards to 136K from 133K. The biggest increase came from smaller
firms, with gains in both goods producing as well as service sector
employers. Manufacturing jobs were up 4K and by 8K in construction,
modestly better than what the June manufacturing ISM report showed
???This morning's Initial Jobless Claims report is equally
positive as it reverses the stalling trend of the last few weeks.
Initial Jobless Claims dropped 14K last week to 374K, and the
four-week average, which smooths out the week-to-week volatility,
dropped by 1500 to 385.8K. While the period for this week's Jobless
Claims data does not correspond with the survey period for
tomorrow's BLS report, it nevertheless provides a reassuring
backdrop for tomorrow.
The expectation for Friday's BLS report was for headline gains of
around 100K. While we may not see any upward revisions to forecasts
at this late stage, many would reasonably be looking for a positive
surprise. A BLS report tomorrow of above 100K jobs in June would
not necessarily mean that the economy is growing at a higher pace
than 2%. But it would definitely confirm that it is not weakening
either. And that would be a net positive.
The recent momentum on the housing front and the drop in gasoline
prices are some of the bright spots for the U.S. economy, likely
indicating that a growth rate in the 2% vicinity is very much
???In corporate news,
) is getting ready to launch a smaller-screen iPad in September,
according to the
Wall Street Journal
. The new device could help the company cement leading market share
position in the tablet space by warding off competition from
), which both have 7-inch devices.
) new tablet, which hasn't yet hit the market, has an even bigger
screen that the original iPad. In other news,
) reported weaker-than-expected June same-store sales numbers and
provided a lower earnings guidance.
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MICROSOFT CORP (MSFT): Free Stock Analysis
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(This article was originally published as
Ahead of Wall Street - July 5, 2012