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Briefing.com Summary:
*The start of third quarter is shaping up to be a soft one at the opening bell.
*The 10-yr note yield has sneakily risen back to 4.50% despite the widely advertised drop in oil prices.
*The ADP Employment Change Report for June was decent and perhaps a precursor to the June Employment Situation Repot on Thursday.
Today marks the start of the third quarter, and what a tough act it has to follow—at least in terms of the stock market's performance.
How does an 88% gain for the Philadelphia Semiconductor Index sound? Or a 27.5% gain for the Nasdaq 100, a 21% gain for the Russell 2000, or a 15% gain for the S&P 500? Those are just a few of the scintillating return metrics for the second quarter.
There is some cooling off this morning, however. Currently, the S&P 500 futures are down 21 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 270 points and are trading 0.8% below fair value, and the Dow Jones Industrial Average futures are down 135 points and are trading 0.1% below fair value.
It is early, and there is still lots of time to buy on that weakness, which was the modus operandi throughout the second quarter. We'll see if that buy-the-dip joie de vivre carries over into the second half of the year.
There are a few hangups this morning that have fostered a more subdued tone ahead of the open.
- There is some softness in the mega-cap space, which has gotten off to a hot start this week, evidenced by the 4.3% gain in the Vanguard Mega-Cap Growth ETF (MGK).
- The 10-yr note yield has sneakily made its way back to 4.50% (as oil prices have come down).
- Fed Chair Warsh will be part of a policy panel discussion at 9:00 a.m. ET at the ECB's Forum on Central Banking, so there is some hesitation to see if he will provide any market-moving remarks.
- The semiconductor stocks are exhibiting some pre-open weakness, which is tempering the momentum bid in the market.
In years past, we might have pointed to weakness in Nike (NKE) after its earnings report as a market driver, yet there is an abiding acknowledgment that Nike's problems are mostly its own, so the 1.5% decline in the stock does not rise to the standard of being market moving.
Similarly, there wasn't much movement immediately after the release of the ADP Employment Change Report for June, which showed private sector employment increased by 98,000 jobs (Briefing.com consensus: 112,000) on the heels of a 122,000 increase in May.
This was a decent report, with small establishments driving the majority of the increase (53,000), although the gains overall were concentrated almost entirely in the service-providing sector (96,000), with education/health services accounting for half the increase there.
The ADP report just might be a breadcrumb to the June Employment Situation Report tomorrow. The Briefing.com consensus is 88,000 for nonfarm private payrolls and 110,000 for nonfarm payrolls.
Other data that will be released today includes the final S&P Global U.S. Manufacturing PMI for June at 9:45 a.m. ET, Construction Spending for May at 10:00 a.m. ET, and the ISM Manufacturing Index for June at 10:00 a.m. ET.
