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Futures jump on ADP miss, Powell comments

U.S. stock index futures extended gains on Wednesday as investors digested a lower-than-expected read on private payrolls after a voting member of the Federal Reserve said on CNBC that nothing is decided on raising rates in September.

The Dow futures briefly gained more than 120 points after trading about 70 points higher before the ADP data.

Federal Reserve Gov. Jerome Powell said Wednesday on CNBC's "Squawk Box" that the labor market continues to be strong, but he has not made up his mind yet on whether interest rates should be raised next month.

"Nothing has been decided and I haven't made any decisions of what I would support and certainly the committee hasn't," he said. "We're still working with the same framework, we're looking for some further improvement in the labor market and reasonable confidence on inflation going back to 2 percent in the medium term. I'm going to be very focused on the data from now until the meeting, particularly the labor market data."

The ADP report came in at 185,000, below expectations for 215,000 private-sector payrolls.

Meanwhile, economists forecast 223,000 nonfarm payrolls in the government's employment report Friday, and that is one of the final key pieces of data the Fed will review before it September meeting.

The July trade report posted a deficit of $43.84 billion.

Yields trimmed gains slightly after Powell's comments and held near those levels after the early morning data, with the 2-year at 0.72 percent and the 10-year yield at 2.24 percent. The dollar traded flat, while the euro edged higher to $1.09.

Earlier, futures fluctuated on Wednesday ahead of the ADP payroll data, which is not seen as an exact preview for Friday's jobs report but it can give directional hints, and the market watches it for any big surprises.

Overnight, markets digested hawkish comments from FOMC voting member and Atlanta Fed President Dennis Lockhart who spoke to The Wall Street Journal. Lockhart said the economy is ready for an increase in short term rates and it would have to deteriorate significantly for it to persuade him not to move.

He said there was a "high bar right now to not acting, speaking for myself." Lockhart is one of the first Fed officials to speak since the Fed met last week, and his comments sent the dollar and bond yields higher.

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

The non-manufacturing ISM index is also due at 10:00 a.m. ET, with analysts expecting a rise to 57.0, which would take it just above the average for the first half of the year.

On the earnings front, Time Warner,Discovery Communications, Priceline,Dominion,Kate Spade, Liberty Media, Motorola Solutions, Ralph Lauren, SodaStream, Wendy's, Virtu Financial are all due before market open.

Shares of Disney fell more than 7 percent in pre-market trade after missing on revenue in its earnings report after the close Tuesday.

After the bell reports are expected from Tesla Motors, Fitbit, Keurig Green Mountain, CBS,21st Century Fox, Weight Watchers, Zulily, and TransOcean.

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In Europe, equities traded higher following a slew of positive data and earnings, led by French bank Societe Generale which rallied 8 percent, topping European markets after its second quarter earnings beat expectations.