The futures markets are well in the red this morning ahead of the Automatic Data Processing (ADP) payroll report and an expected release of new tariffs from the Trump Administration on worldwide imports, scheduled to be released at 4 p.m. this afternoon. These tariffs remain a large source of uncertainty for the markets, which have traded lower in recent weeks. Should the tariffs be less than expected, we think the market would take that development in stride.
The ADP Payroll report showed that private companies added 155,000 jobs in March, easily beating expectations of 120,000 and showing stronger labor demand. These additions occurred across many sectors, with business services adding 57,000 jobs, while financial services added 38,000 positions. Wages increased 4.6% for job stayers, while those who switched jobs received a boost of 6.5%. Despite this strength in the labor market, the futures sold off further after this development, suggesting a weak start to the trading day.
The stock market started poorly yesterday, falling in early action before reaching an oversold condition; the market bounced back in the late morning before trending lower again. Still, market participants bought stocks in the final portion of the day. Overall, the S&P 500 finished higher by 21 points (up 0.38%) and the NASDAQ increased 151 points (up 0.87%). However, the Dow Jones Industrial Average was impacted by weakness from Johnson & Johnson (JNJ), with the index down 12 points (down 0.03%). Moreover, market breadth was rather positive, with advancers outpacing decliners by a 1.7-to-1.0 ratio. Consumer discretionary stocks were amongst the best performers, while healthcare equities were amongst the weakest.
In commodity news, oil prices rose significantly yesterday, with traders pricing in less supply as the U.S. government removed waivers for European drillers operating in Venezuela. Elsewhere, U.S. Treasury bond yields were slightly lower as traders moved into the safe haven asset. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, rose yesterday as traders demanded more options protection.
Several economic reports will be released in the days ahead. These include initial jobless claims, the U.S. trade deficit for February, and the Institute for Supply Management’s Services Purchasing Manager’s Index on Thursday. On Friday, the U.S. Employment report, including hourly wages and the unemployment rate, will be released, and Federal Reserve Chairman Jerome Powell will speak about the economic outlook at the Society for Advancing Business Editing and Writing’s Annual Conference. Elsewhere, a few dozen companies will report quarterly results in the days ahead, though this represents the final lull before several large companies report their quarterly results next week. - 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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