Data deluge: ADP, jobless claims, PMI et al

<html xmlns=""><head><title>LIVE MARKETS-Data deluge: ADP, jobless claims, PMI et al</title></head><body>

S&P 500, Nasdaq gain ~0.5%-0.6%, DJI edges up

Materials lead S&P 500 sector gainers; utilities weakest

Euro STOXX 600 index up ~0.8%

Dollar, bitcoin lower; gold, crude rally

U.S. 10-Year Treasury yield dips to ~3.61%

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at


Market participants were drenched by a data downpour on Thursday, much of which centered on a tight, but shifting, labor market.

The private sector added 278,000 jobs in May, according to payroll processor ADP's National Employment index USADP=ECI.

A 63.5% surprise to the upside, the number is also 113,000 north of what analysts expect the Labor Department's employment report to show on Friday.

While the NEI has a spotty track record as a predictor of official private payrolls, the hot print could very well bode for a hotter than expected jobs report on Friday.

Nonfarm payrolls, after all, have come in above economist projections in 11 of the most recent 12 months.

"We expect payrolls to remain positive for now," writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "But the pace should moderate as the lagged and cumulative effects of monetary policy filter through more broadly through the economy."

The number of U.S. workers filling out first-time applications for unemployment checks USJOB=ECI edged higher to 232,000 last week, 3,000 fewer than analysts expected.

While initial claims have been above 200,000 every week since early February, they have yet to reflect the recent surge in high-profile layoff announcements, much of which has come from tech- and tech-adjacent sectors.

Ongoing labor market tightness is not something Powell & Co like to see.

"While we expect the Fed to leave rates steady at its upcoming meeting, a more sustained loosening of labor market conditions is needed to keep rate hikes permanently off the table," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics.

Ongoing claims USJOBN=ECI, reported on a one-week lag, also inched up, to 1.795 million, a hair below estimates.

Speaking of layoffs, U.S. firms don't appear to be in danger of running out of pink slips.

Announced job cuts USCHAL=ECI increased by nearly 20% last month to 80,089 according to executive outplacement firm Challenger, Gray & Christmas (CGC).

That's 287% year-over-year increase. The running tally so far in 2023 is 417,500, which is more than triple the number of layoffs in January-to-May 2022.

"With the exception of 2020, it is the highest total in the first five months of the year since 2009," notes Andrew Challenger, senior vice president at CGC.

So far this year, the hardest-hit sectors are tech, retail, and - in light of the recent regional bank liquidity crisis - financials.

In more ancient job market history, the Labor Department revised its first-quarter labor costs down to a cooler 4.2% from 6.3%, and revised its previous productivity decrease to a shallower 2.1%.

Pivoting away from jobs, activity in U.S. factories continued to contract in May.

The Institute for Supply Management's (ISM) purchasing managers' index (PMI) USPMI=ECI shed 0.2 points to 46.9 last month, marking its seventh month south of the 50 border, which indicates a monthly decrease of activity.

The good news is that employment picked up, and the prices paid component - an inflation predictor - dove steeply into contraction, to 44.2 from March's 53.2.

"New order rates contracted further, as panelists remain concerned about when manufacturing growth will resume," says Timothy Fiore, chair of ISM' manufacturing business survey committee. "Price instability remains and future demand is uncertain as companies continue to work down overdue deliveries and backlogs."

Not to be outdone, S&P Global issued its final take on May PMI USMPMF=ECI, landing at 48.4, just a hair below its advance "flash" reading of 48.5 issued a few weeks ago.

The dueling PMIs differ in the weight they allot to their various components (new orders, prices paid, etc).

Finally, expenditures on U.S. construction USTCNS=ECI unexpectedly surged by 1.2% in April, blowing past the meager 0.2% increase analysts expected.

The Commerce Department's report showed spending on residential projects enjoyed its first meaningful monthly increase in a year, boosted by the multi-unit segment.

(Stephen Culp)



Wall Street's main indexes are around flat to modestly lower early on Thursday.

Optimism, sparked by passage of a bill by lawmakers to suspend the nation's debt ceiling, is being offset by dismal earnings from Salesforce CRM.N.

The bill to suspend the $31.4 trillion debt ceiling on Wednesday passed with majority support from both Democrats and Republicans and will now head to the Senate, which must enact the measure before a Monday deadline, when the government is expected to run out of money to pay its bills.

A majority of S&P 500 .SPX sectors are lower with utilities .SPLRCU taking the biggest hit. Communication services .SPLRCL is posting the strongest rise.

Banks .KRX, .SPXBK and FANGs .NYFANG are among those groups outperforming.

Here is a snapshot of where markets stood around 45 minutes into the trading day:

(Terence Gabriel)



On Tuesday, the CBOE implied correlation index .COR3M hit its lowest level since October 2018. Thus, traders are on alert in the event this measure starts to percolate:

The CBOE describes the COR3M as a "gauge of herd behavior." It measures the average expected correlation between the top 50 stocks in the S&P 500 index .SPX. The COR3M tends to decline during rally phases and rise amid periods of market stress.

Indeed, on Tuesday the COR3M fell to a reading of 24.06, which was its lowest print since 23.29 on October 4, 2018.

Looking back over the last 5-1/2 years or so, low COR3M readings preceded significant S&P 500 sell offs that began in early 2018, late 2018, early 2020, and early 2022.

With increasing concern over narrow market breadth and gains concentrated in a handful of mega-caps, traders are keeping a close eye on correlations.

Underscoring the concentration of gains, the S&P 500 is up about 9% YTD. Meanwhile, the equal-weighted SPX .SPXEW is actually down 1.4% so far in 2023.

Higher correlation of individual shares (low dispersion) usually means stocks are moving more closely together, dimming benefits of diversification as well as stock picking skills.

(Terence Gabriel)



(Terence Gabriel is a Reuters market analyst. The views expressed are his own)


Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.