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Market Insider: Wall Street Waits for Jobs Report

Published: Tuesday, 29 Sep 2009 | 11:07 PM ET

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By: Patti Domm
Executive Editor

Traders are looking straight past quarter end to the September jobs report at the end of the week.

Stocks are likely to finish the third quarter quietly Wednesday, locking in impressive double digit gains. The Dow is up 15.3 percent; the S&P 500 is up 15.4 percent, and the NASDAQ is up 15.8 percent. Financial stocks did the best of the S&P sectors in the third quarter, gaining 25.8 percent, followed by industrials, up 22.3 percent and materials up 21.6 percent.

"I think the big funds are happy to let this month run out at this level," said one stock trader. The Dow finished Tuesday down 47 at 9742, and the S&P 500 slipped 2 to 1060, after a lower consumer confidence number disappointed investors. Treasurys, except for the long bond, saw selling while the dollar inched higher against a basket of currencies. Oil, metals, and grains were mostly weaker.

ADP's private sector jobs report for September will get attention when it is released Wednesday at 8:15 a.m. It is expected to show the loss of 200,000 jobs. Traders follow the report closely, as a kind of preview to the government's jobs report, but it is not always a good indicator. The government data Friday is expected to show the decline of 200,000 non farm payrolls, and an unemployment rate of 9.8 percent.

Consumer Worries Overshadow Improved Housing Data

Other data Wednesday includes the final look at second quarter GDP, at 8:30 a.m., and the 9:45 a.m. Chicago Purchasing Mangers report. Oil inventory data is reported after the close.

More importantly though will be comments from Fed Vice Chairman Donald Kohn. "Any of the talk we're hearing now about exit strategies is very important," said Brian Edmonds, head of interest rate trading at Cantor Fitzgerald.

Kohn speaks at 12:35 p.m. in a panel discussion on Central Bank exit policies at the Cato Institute's Shadow Open Market Committee Meeting. The session includes questions from the audience.

"We had the FOMC (last week) and they sounded like they're a long way off. Then you get (Fed Gov. Kevin) Warsh speak and he makes it look like they're a lot closer than the FOMC would let on," said Edmonds. Traders have been buzzing for several days now about Friday comments from Warsh, which suggested the Fed could move to tighten sooner than markets expect.

US Economy Needs A Second Stimulus

Warsh is considered a fairly middle of the road Fed voice so his comments were especially surprising to the market. Dallas Fed President Richard Fisher, viewed as more hawkish, made similar comments Tuesday, saying the winding down of the Fed's accommodative monetary policies needs to start as soon as the economy shows convincing signs of traction.

Fed Proposes Tougher Credit Card Rules

The dollar was up for a second day Tuesday. "I think that probably it's not the big bottom yet for the dollar. They key problem is that U.S. rates are below most other countries'," said Marc Chandler, head currency strategist at Brown Brothers Harriman. "The only currency that could make a compelling case for a top to be in place is sterling."

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Sterling firmed 0.4 percent to $1.5951. "Sterling most likely has peaked against the dollar. We would expect to pick off the weakest first," he said.

The dollar firmed $1.4572 per euro. The yen finished at 90.21 per dollar. Chandler said the euro's move higher could be in anticipation of moves by the European Central Bank Wednesday. The ECB has a second refinancing operation Wednesday in which it is expected to make $100 to $200 billion euros available, Chandler said.

Chandler said he expects the euro to test the $1.48 to $1.50 area before carving out a top. "Tops and bottoms in the euro are often made with double tops and double bottoms," he said.

Stocks to Watch

Saks [SKS Loading... () ] stock fell after the bell after it said it was offering up to $100 million in new shares of stock. Nike [NKE Loading... () ] moved higher after the bell,after reporting earnings of $513 million, or $1.04 per share, up slightly from $510 million or $1.03 per share the year earlier. The numbers were well above Wall Street's estimate of $0.98 per share. Jabil Circuit [JBL Loading... () ] was also up after hours after forecasting better than expected earnings.