Stock Futures Hold Gains After ADP Jobs Report
NEW YORK (TheStreet) -- U.S. stock futures were holding gains Wednesday as investors digested better-than-expected jobs data and awaited the wrap-up of the Federal Reserve's two-day policy meeting.
Futures for the Dow Jones Industrial Average were rising 38 points, or 36.32 points above fair value, at 12,987. Futures for the S&P 500 were up 3 points, or 2.98 points above fair value, at 1378, while futures for the Nasdaq 100 were up 12.25 points, or 12.17 points above fair value, at 2649.
The Fed's statement surrounding its latest interest rate decision will be released at 2:15 p.m. EDT.
The announcement of a new bond-buying program, or QE3, from the central bank would be a surprise but there is an expectation for the Fed to start to lay the groundwork for such a move in the commentary around its rate decision on Wednesday afternoon. A change in the pledge to keep rates at historic lows for longer than currently telegraphed is viewed as likely.Dan Greenhaus, chief global strategist at BTIG, described ahead of the conclusion of the meeting what kind of sectors or investments would do well if central banks over-accommodated. "While we would meaningfully contemplate a tactical shift in favor of cyclically exposed areas of the equity market should central banks come in above our 'target,' it should also be noted that unless the support package, in the case of the Federal Reserve, is meaningfully above expectations -- somewhere around $500-$750 billion -- forward PE multiples are not like to expand as much as we've seen in the recent past," said Greenhaus. "QE2 and Operation Twist each added a full two turns in short order. In the case of QE2, this expansion was subsequently erased and in the case of the latter, we would note that Operation Twist coincided with the second LTRO [Long-Term Refinancing Operation ] from the ECB." The Automatic Data Processing jobs report released Wednesday said that employment in the U.S. nonfarm private business sector increased by 163,000 on a seasonally adjusted basis in July. Economists were expecting a figure of 120,000 for July. The estimated gain in June from May was revised down slightly, to 172,000 from the initial estimate of 176,000. The higher-than-expected July figure and the revision suggests a better print than the consensus is currently pricing in for Friday's much-anticipated nonfarm payrolls report, which is plus 100,000, said Ian Lyngen, strategist at CRT. "That said, the ADP has been over estimating NFP by roughly 50k on average over the last four months, so if anything that takes some of the upside from this morning's release," he cautioned. "The relationship in any given month between the ADP report and the monthly payroll report is strained at best but the better than expected ADP July data does support our position that the monthly payroll report will come in better than expected," said Greenhaus. The Institute for Supply Management manufacturing index for July comes out at 10 a.m. It's expected to have rebounded to 50.2 from 49.7 in June. A reading above 50 indicates expansion. The Department of Commerce reports on June construction spending at 10 a.m. as well. The consensus expectation is that construction spending increased by 0.4% in the month after rising by 0.9% in May. Automakers such as Ford (F) and General Motors (GM) issue their car and truck sales reports for July on Wednesday. September crude oil futures were up 8 cents at $88.14 a barrel. December gold futures were up by $1.90 at $1,616.50 an ounce. The benchmark 10-year Treasury fell 6/32, raising the yield to 1.489%. The greenback was trading sideways, according to the dollar index. The FTSE in London was up 0.68% and the DAX in Germany was flat. Yields on Spain and Italy's 10-years eased Wednesday. The Hong Kong Hang Seng index finished up 0.12% and the Nikkei in Japan closed lower by 0.61% amid tepid manufacturing reports out of China. The data added to hopes that policymakers would act to boost the global economy. In corporate news, media and entertainment giant Time Warner (TWX) posted second-quarter adjusted earnings of 59 cents a share on revenue of $6.74 billion. Analysts were expecting profit of 59 cents a share on revenue of $6.95 billion. MasterCard (MA) reported second-quarter earnings of $713 million or $5.65 a share, beating the Wall Street target of $5.57 a share. Net revenue was $1.82 billion, falling short of the consensus estimate of $1.88 billion. Purchase volume increased 13% globally, though revenue amassed in overseas markets took a hit thanks to the stronger dollar. Nokia (NOK) shares were rising Wednesday on talk that Chinese PC maker Lenovo may be interested in the struggling Finnish cellphone maker, Reuters reported.
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