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Look Ahead: Market Gets Warmed Up for Friday's Jobs Report

Jobs-related data Thursday serves as a warm-up for Friday’s important May employment report.

Paul Bradbury | The Image Bank | Getty Images

First, ADP’s private-sector report at 8:15 a.m. ET is expected to show 150,000 private sector jobs were added in May, up from April’s 119,000. While not viewed as a reliable guide for the government jobs report, it does give guidance on private-sector hiring. Economists expect to see a total 150,000 nonfarm payrolls were added in May, when the government’s number is released Friday.

A second piece of jobs-related data — weekly jobless claims – will be reported at 8:30 a.m. Claims are expected to be 370,000, and while that number will not be reflected in the May employment report, claims data is viewed as a critical, current read on employment activity.

“I think what is key about the jobless claims is that the four-week moving average is 370,000. In this week last year, average claims were 434,000 and the year before claims were 460,000. Things are better. As long as claims are 370,000 and potentially lower, then job growth will be above what we’ve seen in the last three months. Private employment has been revised up in 22 of the last 23 months,” said Deutsche Bank chief U.S. economist Joseph LaVorgna.

LaVorgna expects the government employment report to show 150,000 jobs were added in May, up from April’s 115,000 but below the first-quarter trend of 200,000-plus. “ADP has run on average about 9,000 above private employment over the last 12 months … If you’re expecting 150,000 private-sector jobs, ADP should be about 160,000,” he said.

As the jobs data looms, Europe is increasingly worrying markets. U.S. Treasury yields made history Wednesday, when the 10-year reached a record low on both a closing and intraday basis. The 10-year yield fell to 1.627 percent, breaking its September low yield of 1.671 percent.

Stocks and other risk assets sold off on fears of contagion from Europe’s sovereign debt crisis, with Spain’s banks now a focus. The Dow reversed Tuesday’s gains, losing 160 to close at 12,419.86, and the S&P 500fell 19 to 1313. The dollar gained against a basket of currencies, and the euro dipped below 1.24 in late trading. The dollar index was at 83.09, up 0.7 Thursday.

“The dollar’s what’s kicking butt right now,” said Nomura Americas Treasury strategist George Goncalves. “There’s nowhere to run, nowhere to hide except for the dollar … and that also helps out Treasurys.”

Oil fell, with WTI losing more than 3.2 percent to $87.82 per barrel, its lowest level since October, and Brent crude slid 3 percent to $103.47. Gold gained nearly 1 percent to $1563.40 per troy ounce.

Barclays chief U.S. economist Dean Maki said Europe is the main threat to the economy and job growth. He expects to see 150,000 nonfarm payrolls were added in May. “Ultimately, we think 200,000 a month is a reasonable expectation for the remainder of the year. The main risk to that is that the uncertainty coming out of Europe delays hiring plans. At this point, we haven’t seen the same financial-market reaction as we had last year (when Europe was in the headlines),” he said. “For example, if we look at the VIX index, it spiked up to 48, and right now it’s at 24. So it’s not showing the same kind of response that it did last year.” The VIX is viewed as a measure of market fear.

Besides jobs-related data, there is a second reading Thursday on first-quarter GDP, expected at 1.9 percent, and the May Chicago Purchasing Managers index at 9:45 a.m. The Kansas City Fed survey is also at 9:45 a.m.

Retailers also report monthly chain-store sales Thursday, and Thomson Reuters expects the retailers it tracks to report an average sales gain of 2 percent. Apparel stores are expected to fare best, with a gain of 4.3 percent. Drug stores are expect to do the worst, losing 5.2 percent.

Maki said the retail sales data reported in the middle of June will also be telling for the economy, but the main focus now is Europe. Aside from that, “to be honest, we’re just going from employment report to employment report.”

As Wall Street continues to lose face on the Facebook IPO, two high-profile IPOs were shelved Thursday. Travel web site Kayak pulled its IPO for now, and in Hong Kong, Graff Diamonds withdrew its IPO after it failed to generate enough interest. Kayak was being brought to market by Morgan Stanley, Facebook’s underwriter. Facebook stock meanwhile, continued to fall, finishing at a new low of $28.19 Thursday, well below its $38 offering price.

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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