The march towards Friday's jobs report has begun, and anything tied to employment is of big interest Thursday.
Even as rising oil prices tugged at stocks Wednesday, there was speculation the February jobs report could actually meet or beat market expectations this time, after a string of disappointing monthly reports. Economists expect 190,000 non farm payrolls. That would be up from the 36,000 reported for January, which was nearly 100,000 below expectations.
Oil closed above $100 a barrel Wednesday, for the first time since Sept. 30, 2008, as fighting intensified and a Libyan war plane dropped a bomb near an oil exporting terminal in Brega. WTI crude finished at $102.23 per barrel, up 2.6 percent. The IEA also early Wednesday confirmed the reduction of 850,000 to one million barrels a day in Libyan output. As oil soared, gold also rose $6.50 per ounce to a new record of $1437.20.
Stocks were able to shake off the worst concerns about oil, but rising energy prices still contained the market's gains. The Dow rose 8 points to 12,066, and the S&P 500 was up 2 to 1308. ADP's private sector employment reportshowed a gain of 217,000 jobs, and while the number is not necessarily seen as indicative of the government jobs report, it was a positive for market psyche.
"I think the focus of the week, at least the latter half of the week, is on the jobs report. The ISM manufacturing data and other regional Fed manufacturing data has been very strong and every indication has been the manufacturing side of the jobs number will be a strong number. Then you have the ADP report, which was stronger than expected for private sector jobs," said Marc Pado, Cantor Fitzgerald strategist.
Weekly jobless claims are reported at 8:30 a .m., and while the number is not associated with the February employment report, it will be closely watched to see if the that it is moving in the right direction. Economists expect to see 395,000 claims, after last week's 391,000. There is also the 10 a.m. release of the non manufacturing ISM survey, which has an employment component of its own. Productivity and costs are also released at 8:30 a.m.
Pado said he will also be watching monthly chain store sales reports, released throughout the morning Thursday. "They're expected to be up 3.5 percent," he said, adding if they are in line or better-than-expected that will also be a good indicator that the jobs number could show improvement.
"I think today there was a little bit less fear about the jobs number. That was part of the positives. (Fed Chairman Ben) Bernanke holding the course — as much as everybody might be frustrated about QE2 and inflation — at least you know exactly what they're going to do. That kind of stability is good in an other wise unstable situation," he said.
Bernanke testified on the economy before the House Financial Services Committee, his second hearing of the week. The Fed also released its beige book on the economy mid-afternoon, and the report showed expansion in all of the Fed districts.
Goldman Sachs economist Andrew Tilton pointed out that each of the Fed district's also showed improvement in the labor market. "That's pretty noteworthy. There's usually one outlier," he said. Tilton expects to see 200,000 non farm payrolls for Friday.
"We have 200,000 for Friday. We said there may be a little bit of upside risk to that," he said, noting the weak January number was probably impacted by weather. "We think the weather effect was probably something like 75,000, maybe something like 100,000 and so given there was not a snow storm of that magnitude this time around you could get most of that back. That leaves the question of what the underlying trend is."
He said he thinks the job market is showing signs of improvement, from a variety of measures like job advertising, the ADP report, and the ISM reports.
Credit Suisse economist Jonathan Basile said he is watching the jobs component of Thursday's ISM report to see if indicates any change in service sector hiring. Earlier this week, the ISM manufacturing report employment index was at the highest level since 1973.
In the government's January employment report, the overall work week was 34.2 hours, and the manufacturing sector was at 40.5 hours. The higher the number, the more likely jobs are to be added. But the services sector was at 33.2 hours. "If we get another disappointing number, that's why. We didn't regain the hours," he said.
"Maybe we are at the point where firms are generating more revenue, and it's time to believe in the recovery and believe things can be sustained. There's only so far you can go with a services company before you need to add people," he said.
He pointed to a telling number in the non manufacturing ISM report. "One way to look at that is the spread between business activity and employment. It was very wide last month," he said.
Bubbling Oil, Dollar Gets Drilled
Even as oil prices hit fresh highs, some traders expect to see a pull back as Saudi Arabia puts more oil on the market. But Ray Carbone, president of Paramount Options said the price could stay high and rise some more.
"The Saudis may say they can match barrel for barrel what you lose from Libya, but they cannot match what's in the barrel — the light sweet crude that Libya producers. You get less product out of the barrel with high sulfur oil (from Saudi)," he said.
"Every day it's a Mid East roundup of where the unrest is..Anyone that says there are not legitimate concerns about the oil market, they are just not in touch with where 40 percent of the world's oil comes from," Carbone said. "Of course you've got the Libyan problems front and center, but you've also got questions about Bahrain, Iran."
The dollarWednesday continued to wilt against the euro, which gained 0.7 percent to 1.3867.
Boris Schlossberg of GFT Forex said the market will be watching the European Central Bank rate meeting and comments from ECB President Jean Claude Trichet ahead of the Wall Street open Thursday. The ECB is not expected to move on rates.
Schlossberg said he will be listening to hear whether Trichet says the risks are tipped more toward inflation, a sign the ECB will move on rates soon. "The market is assuming the rate hike is almost a done deal in May," he said.
If the tone does not change, he expects the euro to sell off. "I think you'd see a little bit of a disappointment because the euro has really ramped up on anticipation," he said.
He also said the market is fixated on the U.S. jobs report Friday. The Swiss franc, which has run to record levels against the greenback, could take a hit if the number is strong.
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