Equity futures are pointing slightly higher this morning, but the gains are far from comforting considering the S&P 500 slid 2.2% yesterday, led by 5.3% tumble in financial stocks.

Positive data in nationwide manufacturing, auto sales, and newly signed contracts for home sales yesterday weren’t enough to alter widespread sentiment that the 5-month rally in markets had overheated, but there’s plenty of data this morning that looks likely to try again. Analysts expect the ADP private jobs survey to report moderating losses in August, while productivity gains in the second quarter may be revised up, and factory orders are set to see gains. 

In the afternoon, minutes from the last FOMC meeting are expected to show that central bank officials are increasingly optimistic about the prospects for recovery.

Unfortunately, global stocks aren’t boosting sentiment. Though China’s Shanghai Index gained 1.16%, Japan’s Nikkei dropped 2.37% and the Hang Seng fell 1.76%. Stocks in Europe are currently in the red too.

“Meantime, commodity prices are firming up, with oil finding support at the $68 level after sliding from $74 at the start of last week,” said Robert Kavcic from BMO. “The US$ is modestly weaker on a trade-weighted basis—the yen remains strong with risk aversion still on the rise, while the Aussie dollar is rallying after better-than-expected Q2 GDP results.”

Key Releases Today:

8:15 ― Forecasters believe the ADP employment report will show 245,000 private jobs were lost in August, an awful number historically, but one that compares well with the -371k print in July or the -571k average in the first six months of the year. If true, markets will have good reason to believe that Friday’s payrolls report will show slower lay-offs in August than in July. However, not all data are pointing in that direction: in the survey week mid-way through the month, there were 580k initial jobless claims in August, compared with 559k in July.

8:30 ― Revisions to the Productivity & Costs report are expected to be minor. The original reading found unit labor costs had been slashed 5.8% in the second quarter, allowing companies to reduce costs to boast productivity gains of 6.4%. 

“This productivity growth is a remarkable achievement during a difficult business cycle,” said analysts from IHS Global Insight, who believe productivity will be revised up to +6.6%. 

They said reduced costs are contributing to low inflation, giving the central bank a green light to continue with loose monetary policy. “This will provide the Fed with a clear checkered flag to keep rates low for an extended period, thereby providing a sounder basis for a more sustainable recovery as time progresses and various fiscal stimulus programs roll off the calendar.”

10:00 ― Factory Orders are expected to rise 2% in July, based on flat readings in orders for non-durables and big strength in durable goods. The latter figured was already released last week, but its 4.9% jump was due mostly to strength from Boeing aircraft orders.  

2:00 ― With the Federal Reserve continuing to hold monetary policy at the status quo, it’s unlikely that the FOMC minutes will be groundbreaking, but markets will be looking at the headlines to gauge the general sentiment at the meeting, which was probably upbeat.

“We expect the economic assessment from the FOMC members to have improved in comparison to the previous meeting, along with little disagreement on inflationary risks and monetary easing,” the forecasting team at BBVA said. “It is likely that the committee revised up its GDP growth forecast.”

As always, any comments on the central bank’s exit strategy from their massive liquidity injections will be closely monitored.


The Treasury will not hold any auctions today. Meantime, expect the rally in bonds to continue if equities point south. The benchmark 10-year Note has fallen to 3.36% this week, compared with 3.50% last Friday.