SUMMARY OF UPCOMING DATA 09/03/09
DATA RESULTS 09/01/09
ADP EMPLOYMENT REPORT (-298,000)
PRODUCTIVITY (6.6% vs.6.4%), UNIT LABOR COSTS (-5.9 % vs.-5.8%)
US FACTORY ORDERS (1.3% vs. 2.3%)
EIA INVENTORY REPORT (CRUDE OIL -377K, GASOLINE -3.0 M, DISTIL 1.2M, CAPACITY 87.2@)
2:00 PM FOMC MEETING MINUTES
US DEBT REVIEW AND OUTLOOK
US TREASURIES moved higher again for the third session this week in the wake of a greater than expected loss of jobs in the private sector. The ADP employment report showed a loss of 298,000 jobs. Expectations had been for a loss of about 250,000. Despite the higher number, it was still the lowest number of job losses in nearly a year. July's numbers had been revised downward from -371,000 to -360,000.
Gains continued to build momentum up into the release of the FOMC meeting minutes, which stated that Federal Reserve Officials had expressed considerable uncertainty regarding the sustainability of economic recovery. In addition, risk premium with regards to corporate debt reached its highest level in six weeks today, rekindling focus on default possibilities as well as concerns regarding the global economies ability to ride through the speed bumps in the economy that most agree will be inevitable in their appearance (health care vote anyone?). This will offer treasuries support in the face of renewed supply concerns as announcements for Treasury auctions take place on Thursday. Yields at these levels may result in an attempted pullback in prices as foreign buyers may be put off by the price/yield ratio.
Technically, December US 30 year futures broke through resistance today at 120-19. This puts the contract in what could be a near term bull trend with an upward target of 121-30. RSI on daily and 60 minute indicators show market to be overbought for time being. Expect a pullback with a little fundamental prodding and short covering back to initial support at 119-28.
US EQUITY REVIEW AND OUTLOOK
US EQUITIES failed to recover from Tuesday's downward trend. Negative sentiment eventually won out over a mixed result of data today. Productivity and labor costs posted their best overall results in nearly six years. However this data was overshadowed by the release of the ADP employment figures, which showed a loss of -298,000 jobs. This number was higher than expected and put a pessimistic outlook on Friday's jobs data. Many are expecting that the number may be worse than consensus forecast of a loss of 250,000 jobs. US factory orders also came in lower than expected.
Financial stocks appeared to fade into the background this session, which kept volatility relatively low, particularly in the S&P 500. It was essentially a stock pickers market today with no one sector having a positive or negative influence on the market's performance. If there was any sector that appeared to have some signs of life, it was health care, with several acquisitions resulting in significant gains. BP energy also jumped nearly 4 percent after reporting that it made a major oil discovery in the Gulf of Mexico.
Overall, the markets appear to be setting up for an early exit this week after the release of Friday's employment data. Traders and investors seem to be awaiting the end of the summer doldrums and a likely pick up in volatility. Opposing sentiments should soon meet as possible sidelined cash meets concerns regarding the uncertainty of sustained economic growth and healthcare outlook.
Technically, Sept S&P futures tested initial support level at 992.00. Looking for market to move through to test the 988.00 level. The contract should find near term support at 986.50. If this level breaks. Resistance sets up at 1006.00 with a break above setting up for test of 1013.00, though should expected some difficulty moving through 1009.00
US DEBT FUTURES
US Z9 (US 30 YRS)
SP U9 (S&P 500)