Today is the first trading day of June, so naturally everyone is wondering whether we'll see a June swoon or a June boom when it is all said and done. One person's guess is as good as the next person's since the future is unpredictable. All that is known right now is that a strong ADP Employment Change Report for May has given the S&P futures a boost, which is expected to translate into a higher start for the cash market.
The thrust of the ADP report is that it has set a hopeful tone ahead of Friday's Employment Situation Report. According to ADP, an estimated 253,00 jobs were added to private sector payrolls in May. That was well above the Briefing.com consensus estimate of 180,000 and the prior month's revised increase of 174,000 (from 177,000).
The goods-producing sector added 48,000 positions and the service-providing sector accounted for 205,000 jobs. The job gains were broad-based by company size, too, with small businesses adding 83,000 jobs, mid-sized businesses adding 113,000 positions, and large businesses increasing their payrolls by 57,000.
What everyone is anxious to see in Friday's employment report, though, is whether the tightening labor market is driving up average hourly earnings. So far, that hasn't really been the case despite the U-3 unemployment rate dropping to 4.4%.
For now, there is a modicum of hope that stronger earnings growth will shine through, which would be a good portent presumably for consumer spending and GDP growth.
Sticking with the labor market theme, the weekly initial claims report was not quite as good as expected, yet it was still good. Initial claims for the week ending May 27 increased by 13,000 to 248,000 (Briefing.com consensus 239,000) while continuing claims for the week ending May 20 decreased by 9,000 to 1.915 million.
There were no special factors influencing initial claims, which held below 300,000 for the 117th straight week. Notably, the four-week moving average of 1,914,500 for continuing claims is the lowest since January 12, 1974.
The key takeaway from the report is that it reflects a general reluctance still among employers to cut payrolls, which is indicative of a belief that it is tough to find new workers and/or the demand outlook is favorable.
The ISM Manufacturing Index for May (Briefing.com consensus 54.7; prior 54.8) will be released at 10:00 a.m. ET along with the Construction Spending Report for April (Briefing.com consensus 0.5%; prior -0.2%). Auto and truck sales data for May will be released throughout the day.
Market participants will be eyeing the economic data closely as they work to assess how it might impact the Fed's thinking on interest rate changes and the size of its balance sheet.
Manufacturing PMI reports have been released elsewhere today. The final readings out of the eurozone were reassuring, yet the Caixin manufacturing PMI report for China, which covers mostly small and mid-sized firms, was disappointing with a sub-50 reading (49.6). That was the first dip into contraction territory in nearly a year and it is in conflict with the continued expansion seen in the official manufacturing PMI report for China, which involves many larger and state-backed manufacturers.
The market has taken note of the Caixin report, yet it is not the focal point at this juncture.
The S&P futures are up three points and are trading 0.2% above fair value. Meanwhile, Treasuries have weakened in the wake of the ADP number. The 10-yr yield is up two basis points to 2.23% while the 2-yr yield is up three basis points to 1.31%.
There is a hodgepodge of corporate news, yet none of it has had any market-moving cachet.