ADP's private sector payroll data will be key for bonds, stocks and the dollar on Wednesday morning, and it could set the stage for an even bigger move in financial markets when the government jobs report is released Friday.
"What in theory could happen is if that number comes in on the high side, (stocks) could continue trading down based on this whole idea that interest rates need to rise a little bit more," said Julian Emanuel, equity and derivatives strategist at UBS.
Interest rates already have already been rising, and a combination of higher yields and a surprise widening of the U.S. trade deficit was a toxic combination for stocks Tuesday. The Nasdaq, small caps and high fliers felt the brunt of the pain. The Nasdaq fell 1.5 percent to 4,939, compared with the S&P's 1.2 percent fall to 2,089. The Dow, Nasdaq and S&P all closed below their 50-day moving averages.