With stocks at multi-year highs, Wall Street bulls are looking for fresh fuel for the rally in economic reports after Tuesday’s surprisingly strong manufacturing data.
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Wednesday’s data includes ADP’s private-sector jobs report, which traders watch as a sort of preview to the government's report on nonfarm payrolls, even though it often doesn't correlate. The report, released at 8:15 a.m. ET is expected to show that 175,000 private-sector jobs were added in April. There is also the Challenger layoff report at 7:30 a.m. and factory orders for March at 10 a.m.
Tuesday’s ISM manufacturingdata showed a surprising jump to 54.8 from March’s 53.4. Economists had expected the April number to show a decline, and the market was braced for weaker data after a string of negative surprises, including first-quarter GDP.
“Certainly people were caught off base. Before it came out, there was a rumor running around that it must be bad,” said Art Cashin, UBS director of floor operations.
The stronger number also dashed some concerns about Friday’s jobs report, which economists have been expecting to be about only about 30,000 to 40,000 better than the weak 120,000 nonfarm payrolls added in March.
Stocks finished the day higher, but off the highs of the day. The Dow closed up 65 at 13,279, its highest level since December 2007. The S&P 500was up 7 at 1405, and the Nasdaq rose 4 points to 3050.
“It proves all the bears are in Europe,” said Cashin. “Europe reopens tomorrow and all the things we worried about last week suddenly could come alive again. Three quarters of the world was closed today and we got to play in our own sandbox.”
Europe’s markets were closed for the May Day holiday, and they reopen Wednesday. European PMI data is released Wednesday morning.
The euro Tuesday was just slightly lower against the dollar, but it was up 0.4 percent against the yen.
“What I thought was interesting was the euro had this very interesting decoupling from risk. Equities skyrocketed and the euro came off its highs” when the ISM was released, said Boris Schlossberg of GFT Forex. As the dollar strengthened on the ISM data, and the euro faded, oil also rallied. Treasurys sold off, and the yield on the 10-year moved from a low of 1.896 percent before the 10 a.m. data, to 1.945 percent late in the day.
Traders will also be watching a crowd of Fed speakers, including Fed Gov. Daniel Tarullo at 8 a.m. ET in New York. Tarullo is also expected to meet with the CEOs of major banks on bank stress tests and other issues.
Richmond Fed President Jeffrey Lacker speaks at 1230 p.m.; Philadelphia Fed President Charlie Plosser speaks at 1:30 p.m. on the economic outlook, and Chicago Fed President Charles Evans speaks at 6:30 p.m. at a Chicago Fed conference on strategies for economic stability and growth.
Several Fed officials spoke on Tuesday. CNBC’s Steve Liesman interviewed Chicago Fed President Charles Evans together with Atlanta Fed President Dennis Lockhart. Evans said there is “tremendous room” for more accommodation, while Lockhart said he would be “reticent to pull the trigger” on more accommodation.
Richmond Fed President Richard Lacker also spoke Tuesday and he said the Fed needs to be ready to raise rates even if unemployment is above 7 percent.
“We do have Lacker again tomorrow. I suspect he will be hawkish,” said Ian Lyngen, senior Treasury strategist at CRT Capital. “It’s really about the nonfarm payrolls — the big number at the end of the week.”
Besides the economic reports, there are dozens of corporate earnings, including: Time Warner, Comcast (CNBC’s parent), MasterCard, PG&E, UBS, Allergan, Barrick Gold, Devon Energy, Marathon Oil, CVS Caremark, Clorox, Rowan and Martha Stewart report ahead of the opening bell. Allstate, Green Mountain Coffee, Transocean, Zillow, Whole Food, Dreamworks Animation, Hertz Global and Hartford Financial report after the close.
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