Markets are counting down to Friday's jobs report, and the expectations for a strong number are rising.
For that reason, even more weight than usual will be given to Thursday's weekly jobless claims and ADP's private sector jobs data. The May employment report has been one of the most anticipated data points in weeks, and with the consensus at 515,000, economists forecasts cover a wide range.
The number of actual private sector jobs forecast within that number varies widely. Some economists expect temporary census workers to account for upwards of 300,000 of those jobs. Jefferies, for instance, expects a payroll number of 625,000, with 450,000 of those census workers.
Even President Obama added to the speculation Thursday when he commented on the jobs report during a speech on the economy. "We expect to see strong jobs growth in Friday's report," he said.
Stocks bounced back Wednesday, as energy shares recovered losses and no fresh headlines showed up from Europe to derail the rally. The Dow was up 225 at 10,249, and the S&P 500 jumped 27 to 1098.
"I think there's some degree of optimism around Friday's payroll report. I think that's a huge swing factor," said Barry Knapp, head of equities portfolio strategy at Barclays Capital.
"I would say the number we need to really help the markets here would be census, plus 250,000 (private sector jobs). I would say if we get something like 100,000, we'll be right back in trouble," he said.
Traders said the market also made some technical progress Thursday. "The last two days, we've been testing 1070 to 1075, which could be a new technical higher low. It seems like there are patterns that could mean a move through the 200-day," said Scott Redler, a technical strategist with T3Live.com. He said if the S&P does move through its 200-day, at 1102, it could be heading for 1120.
"Traders could be watching 1120 to 1140 as we come to the end of June and the end of the quarter," he said. "The question then will be is this the eye of the storm."
Stocks acted better after the European markets closed. "The problem is you don't know what you're waking up to tomorrow morning," said one trader, adding that as the S&P moves above 1100, he expects to see investors put on more shorts.
Knapp said some of the signs of stress for markets have settled down. "A lot of the interbank lending scare has dissipated," he said, noting Libor has been moving down.
"A lot of those things that two weeks ago were at extremes did normalize last week. The bond market being a great case in point," said Knapp. He also noted that the cost of buying out of the money puts in the S&P 500 has also dropped, after being at a high two weeks ago as investors looked to buy downside protection.
What to Watch
Besides the 8:30 a.m. release of weekly jobless claims and 8:15 a.m. ADP data, ISM non manufacturing data is released at 10 a.m. Productivity and costs are at 8:30, and factory orders are at 10 a.m.
Chain stores report monthly sales for May Thursday morning and are expected to show a low single-digit gain on average. Thomson Reuters same store sales index is expected to show a gain of 2.6 percent in May, after a decline of 4.8 percent for May of last year.
Discount stores are expected to be the best performers, up 4.4 percent, followed by apparel, up 1.1 percent. Costco is expected to see sales growth of 9.7 percent, while Target is expected to see sales rise 1.2 percent. JW Nordstrom is expected to see sales rise 4.8 percent, and Macy's are expected to rise 0.9 percent.
British Petroleum stock Thursday rose 3 percent after its decline of 15 percent the day earlier, as it worked on yet another plan to stop oil from flooding into the Gull of Mexico. Haliburton and Transocean also rose.
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