The stock market is 2-for-2 this week, posting modest losses on both Monday and Tuesday. There was a feel both days that the selling pressure might intensify, yet that never proved to be the case. Today, there isn't any strong feeling that sellers are going to step up in a big way. At the same time, though, there isn't a strong feeling that buyers will either.
At the moment, the S&P futures are up two points and are trading in-line with fair value.
It's a somewhat surprising indication considering the ADP Employment Change report for February was undeniably strong.
The latter showed an estimated 298,000 private-sector jobs were added to payrolls in February. That was well above the Briefing.com consensus estimate of 180,000. Notably, the job growth was broad based by industry and company size. For good measure, January payroll gains were revised up to 261,000 from 246,000.
The warm February temperatures were cited as a possible driver of the stronger than expected job gains, as there was a large 66,000 increase in construction jobs. If all of those jobs were excluded, however, private-sector payroll gains would still be in excess of 200,000.
This report seems certain to drive up economists' estimates for nonfarm payroll gains in Friday's Employment Situation Report for February. The Briefing.com consensus estimate for that particular metric is currently 188,000.
The ADP report should also reinforce the prevailing view that the Fed is likely to raise the target range for the fed funds rate at next week's meeting.
The Treasury market, which was already weak ahead of the ADP report, got a little weaker after its release. The yield on the 10-yr note is currently up five basis points at 2.57%.
The jump in market rates could be stifling the stock market's enthusiasm for an otherwise encouraging employment number, as rising market rates are a challenge to equity valuations.
Some other possible headwinds include weaker oil prices (-1.2% to $52.54) following a huge oil inventory build (+11.6 mln barrels) reported by the American Petroleum Institute, looming (geo)political uncertainty, and a surprisingly imbalanced February trade report from China, which featured a 1.3% decline in exports and a 38.1% increase in imports.
The Lunar New Year, which covered parts of February, has received some attribution for skewing China's February trade figures. Accordingly, neither the exports nor the imports data is being taken at face value, which is to say market participants are content to wait on next month's report to cast any stronger judgments on China's trade activity.
In other economic news, fourth quarter productivity and unit labor costs were left unrevised at 1.3% (Briefing.com consensus 1.5%) and 1.7% (Briefing.com consensus 1.6%), respectively.
The gain in productivity was a function of output increasing 2.4% and hours worked increasing 1.0%. From the fourth quarter of 2015 to the fourth quarter of 2016, productivity increased at a subdued rate of 1.0%.
The increase in unit labor costs, which have risen 2.0% over the last four quarters, stemmed from a 3.0% increase in hourly compensation and a 1.3% increase in productivity.
There isn't much in the way of corporate news that is making a difference this morning. One lead item is a New York Times article indicating Dow component Caterpillar (CAT) has been accused of tax fraud in a report to federal investigators. CAT shares are down 2.0% in pre-market trading.
Several retail stocks are under pressure after disappointing with results and/or guidance, yet The Children's Place (PLCE) is bucking that trend with an 8.0% gain in pre-market action following a remarkably good fourth quarter report and outlook.