The stock market futures were mixed this morning, ahead of the Automatic Data Processing (ADP) payroll report. This follows the severe market volatility experienced yesterday after the enactment of tariffs on goods imported from China, Mexico, and Canada. Still, traders believe that a compromise on tariffs may well occur, as Commerce Secretary Howard Lutnick said that the U.S. might meet its neighboring countries in North America “in the middle” to “work something out.” Elsewhere, several areas of the market are benefiting from potential policy enactments outlined in President Trump’s address to Congress last night. This includes automakers Ford (F), General Motors (GM), and Tesla (TSLA), as President Trump proposed making interest on car loans tax deductible if the car was U.S.-made. This could increase demand for cars from those automakers.
The futures market slid lower once the ADP Payroll report was released. This showed that private employers added just 77,000 jobs in February, which was well lower than January and economists’ estimates. Transportation and utilities lost 33,000 jobs, while construction added 26,000 positions. Job-stayers achieved an average increase of 4.7% to annual wages, while job changers increased their pay by 6.7%. Altogether, the latest ADP Payroll report underwhelmed the market, and futures moved toward breakeven levels, suggesting traders are acting cautiously ahead of the start of the trading session. Later today, the market may well be impacted by the release of the Federal Reserve’s summary of Commentary on Current Economic Conditions, commonly known as the Beige Book.
The markets started trading lower yesterday as investors priced in the effects of tariffs being enacted on goods imported from China, Mexico, and Canada, as well as the potential for retaliatory policies from overseas trade partners. The market found itself lower in short order yesterday, before rebounding throughout much of the middle of the trading session. In the final hour, stocks headed south again, but did not reach their daily lows. All told, the S&P 500 retreated 72 points (down 1.22%), the NASDAQ declined 65 points (down 0.35%), and the Dow Jones Industrial Average fell 670 points (down 1.55%). Market breadth was very weak, as decliners outpaced advancers by a 3.4-to-1.0 ratio. All eleven stock market sectors were in the red yesterday, but financials were amongst the weakest performers. Technology issues performed better on a relative basis, finishing barely in the red.
In commodity news, oil prices slipped lower yesterday as traders priced in weaker demand for the fuel source. Elsewhere, U.S. Treasury bond yields largely increased throughout the day as traders moved away from the safe haven asset. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, ended the day higher as traders bought more options protection.
Several economic reports will be released in the days ahead. These include initial jobless claims, U.S. productivity, and the U.S. trade deficit on Thursday. On Friday, the U.S. jobs report, the U.S. unemployment rate, and U.S. hourly wages will be released. Additionally, several regional Federal Reserve Presidents will give remarks on the broader economy throughout the day. Elsewhere, a few dozen mostly smaller companies will report earnings in the days ahead, which may impact individual stock performances. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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