The equity futures are slightly in the red this morning following the release of the latest employment report by Automatic Data Processing (ADP), a key indicator of the health of the labor market. The report showed that private payrolls increased by only 150,000 in June, which was far lower than the Street’s expectations. Leisure and hospitality added around 63,000 jobs, while construction (up 27,000 jobs) and professional and business services (up 25,000 jobs) were a plus. Additionally, wage gains were lower during June, with a 4.9% increase in wages for job stayers, while job switchers gained 7.7%. Wage gains have been an important contributor to inflationary pressures, but these appear to be weakening. Overall, we foresee a softer start to the trading day. Several economic reports will be released later today, including factory orders, the Institute for Supply Management’s U.S. Services Index, and the minutes from the June meeting of the Federal Open Market Committee (FOMC). These reports may well impact trading later today.
The stock market rose throughout the day yesterday, buoyed by the strong performance of electric auto maker Tesla (TSLA), which reported better-than-expected vehicle deliveries during the second quarter. Stocks moved higher through much of the day, with the momentum accelerating through the closing bell. When the dust cleared, the S&P 500 finished at an all-time high, clearing 5500 for the first time. The NASDAQ also finished at a high-water mark. Overall, the S&P 500 rose 34 points (up 0.62%), the NASDAQ increased 149 points (up 0.84%), and the Dow Jones Industrial Average was higher by 162 points (up 0.41%). Market breadth was rather robust, with advancers outpacing decliners by a 1.9-to-1.0 ratio. Consumer discretionary stocks were amongst the best performers, while healthcare stocks were the weakest sector.
In commodity news, oil prices rose early in the session due to fears about the potential impact of Hurricane Beryl on drilling and oil production in Texas and the Gulf of Mexico. However, pricing quickly reversed later in the trading session, as these concerns abated with the update of the hurricane’s path, and the new map of the storm would less affect the fuels industry.
Elsewhere, U.S. Treasury bond yields were largely lower yesterday as inflation concerns continued to moderate. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, fell again as traders priced in lower future volatility.
Several economic reports are slated for release on Friday after the Fourth of July holiday. These include the June U.S. employment report and the unemployment rate, which will give further insight into the state of the consumer. Elsewhere, earnings season will pick up later next week with several large diversified banks' earnings. - John E. Seibert III
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
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