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US Stocks Pare Losses After ADP Jobs Report

U.S. stock index futures signaled a lower open on Wednesday, but pared losses after a stronger-than-expected ADP jobs report and after the number of Americans filing for jobless claims fell for a second week. Weakness in European stocks on worries over Portugal and Greece and a decline Asian shares after weak data from China where weighing on U.S. equities.

Both stock and bond markets will shut early in the U.S. on Wednesday, ahead of the Independence Day holiday.

"We're still in this rough period. We have a 10 percent to 20 percent correction ahead of us later this quarter, early next quarter. For two months now I've been a seller of anything above Dow 15,000 and I'll stay that way," Paul Schatz of Heritage Capital told CNBC.

The ADP employment report showed that the U.S. employment rose by 188,000 private-sector jobs in June, up from a 134,000 increase in May and besting expectations for 160,000 jobs. The report is used as rough guide for the government report on non-farm payrolls on Friday.

"This would suggest that nothing's changed. The job market is remarkably stable," Mark Zandi, chief economist at Moody's Analytics, told CNBC.

Deutsche Bank said its U.S. economists viewed the ADP report as the single best predictor of monthly changes in payrolls.

"Over the last 12 months, the average error between the difference in private payrolls and ADP has been -14,000, which is quite small, since the standard error on private payrolls is about 75,000 per month," said Deutsche Bank's Jim Reid in a morning research note.

(Read More: Traders Watching Data for Clues to Jobs Report)

Also, initial claims for unemployment benefits slipped 5,000 to a seasonally adjusted 343,000, the Labor Department said on Wednesday.

While the weekly number does not overlap with the reporting period for June's job report, the markets watch it as a gauge of current employment activity.

Meanwhile, consultants Challenger, Gray & Christmas said in a report that a jump in job cuts in the computer and education sectors drove an increase in layoffs at U.S. firms in June, but the number of job cuts in the first half of the year improved from the first six months of 2012.

(Read More: Stocks Start Q3 on Upswing, But Headwinds Coming)

In other data, the U.S. trade deficit widened in May to $45.03 billion from $40.15 billion in April.

There is also the 10 a.m. release of ISM (Institute of Supply Management) non-manufacturing data, which depicts services sector activity, and gives a look at jobs in the sector. The ISM manufacturing survey earlier this week showed the employment index slipped into contraction territory, and manufacturing is one area in Friday's jobs report where economists expect softness.

Global markets were broadly lower on worries about the European periphery and slowing growth in China. Asian markets reversed early gains on Wednesday after China's official service sector PMI (Purchasing Managers' Index) declined to its weakest level in nine months in June. The report followed two manufacturing surveys out earlier this week, which also showed growth at multi-month lows.

Meanwhile, concerns about political instability in Portugal, and debt refinancing in Greece, saw key European indexes fall by 1 percent. Banking stocks posted the biggest declines and the Portuguese stock market fell by 6 percent.

"Markets are speculating about the fate of the (Portuguese) prime minister, and to the extent that this problem reflects concerns over Euro inspired austerity, there are wider implications," UBS global economist Paul Donovan wrote in a note.

Meanwhile, U.S. oil prices soared to a 14-month high above $100 a barrel on Wednesday, following a decline in crude stockpiles, and concerns that unrest in Egypt could disrupt oil supplies.

No major earnings reports are expected on Wednesday. Second-quarter earnings season will officially kick-off next week, when Dow component Alcoa reports on July 8. Market expectations are low for earnings, with S&P Capital IQ cutting its outlook for S&P 500 profits again this week.

JPMorgan downgraded Alcoa to "neutral" from "overweight," reflecting forecasts for lower aluminum prices.

Health insurers may be active after the Obama administration delayed a key provision of health care reform — the requirement employers to provide health insurance for their workers — until 2015.

(Read More: Prove-It Time Ahead for Market as Earnings Loom)

In the bond markets, the Federal Reserve is due to purchase $4.75-$5.75 billion of 5-6-year Treasury notes.

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