Futures Off Lows After ADP Reading

U.S. stock market index futures indicated a lower open Wednesday, though they were off the morning lows after a weaker-than-expected private payrolls report.

The private sector created just 135,000 jobs in May, according to the ADP National Employment Report, less than estimates for 165,000. The ADP figures come two days ahead of the government's more comprehensive labor market report, which includes both public and private sector employment.

Lee Hardman, a currency economist at Bank of Tokyo-Mitsubishi, said in a note that the ADP report has been an inaccurate predictor of nonfarm private payrolls so far in 2013, over or underestimating numbers by just under 50,000 on average each month.

Traders, however, have used the weak economic conditions to keep hopes up that the Federal Reserve will not back off its easing measures anytime soon.

Other economic data painted a mixed picture: Unit labor costs tumbled 4.3 percent, while productivity rose 0.5 percent. Also on the economic front, factory orders will be reported at 10 am ET and the Fed's Beige Book, its region-by-region assessment of the economy, will be out at 2 pm ET.

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Futures were lower earlier, after the Japanese Nikkei tumbled nearly 4 percent when Prime Minister Shinzo Abe's third "Abenomics" arrow to boost the economy failed to impress investors. Other Asian indexes and European bourses also traded lower on the news.

"The comments made by Abe today were not really a game changer and disappointed a market which seems to have been positioned for a USD/JPY and Nikkei rally," IG Index market strategist Stan Shamu wrote in a research note.

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The so-called third arrow of Abe's growth-reviving strategy follows monetary and fiscal stimulus measures that were put into place earlier this year. So far, however, Japanese stocks remain jittery on fears of a tapering of stimulus measures by the Federal Reserve, and stuttering growth in China.

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Also out on Wednesday is the ISM (Institute of Supply Management) nonmanufacturing report, at 10 am ET, which contains an employment component that could also provide a signal for Friday's jobs report. Economists polled by Reuters forecast the index will come in at 53.3 for May, slightly up on the previous month's reading of 53.1. Reading above 50 indicates expansion in the services sector.

"The non-manufacturing ISM has remained further in positive territory than has the manufacturing ISM in recent months, and we expect this trend to continue," Barclays analysts Hamish Pepper and Sudakshina Unnikrishnan said in a note Wednesday. "While the new orders and business activity indices fell in May, the employment index improved, and on balance we see the pace of service sector activity growth as having improved modestly since last month."

In company news, Apple shares fell nearly 1 percent in premarket trading after a trade agency ruled that the company violated a Samsung mobile phone patent.

The Treasury Department said it will sell an additional 30 million shares of General Motors common stock from the government's bailout of the U.S. auto sector. The Treasury, has said it will finish its exit by early next year.

JPMorgan Chase will take an $842 million hit due to the bankruptcy of Jefferson County, Ala., the company said, sending its shares down 0.4 percent.

In early economic reports, the Mortgage Bankers Association said home loan applications fell 11.5 percent last week as interest rates climbed past 4 percent for the first time in a year.

Treasury yields fell in morning trade, with the benchmark 10-year note dropping to 2.113 percent.