The market is expected to shift its attention from developments in Europe to developments on the home front. But as Tuesday’s late-session rally on unconfirmed reports of bank recapitalization plans showed, developments in Europe are the biggest draw for this market.
But the market will be getting a closer look at the domestic labor market the rest of this week, starting with this morning’s better-than-expected ADP jobs report and culminating with the all-important government non-farm payroll report on Friday. We also have the ISM service sector report on the docket for a little later, which is expected to weaken a little from the August level.
The ADP report came in better than expected, with 91K private-sector jobs created in September. The prior-month’s tally was modestly revised downwards to 89K from the originally reported 91K level. The ADP report is supposed to provide the market with a preview of the official non-farm payroll monthly numbers from the Bureau of Labor Statistics (BLS). Today’s ADP report is broadly in-line with the expectations for private-sector jobs in Friday’s BLS report, which is a net positive in these uncertain times.
Overall, the ADP report’s track record in foretelling the BLS numbers has been less than solid. Last month we got a paltry 17K private sector jobs number from the BLS when the ADP had reported a much more respectable 91K jobs. We will have to wait till Friday morning to find out how good of a job today’s ADP report did.
In corporate news, we had Costco (COST) come out with better same-store sales growth in its quarterly results, though its top-line barely matched expectations. Higher merchandise costs weighed on margins, but the warehouse-style retailer was able to post an earnings beat when inventory-related charges are excluded.
Monsanto (MON) came out with a top- and bottom-line beat in its quarterly results this morning. In other corporate news, I can’t help but point out Tuesday’s underwhelming output from Apple’s (AAPL) much-anticipated event.
Today’s positive ADP report should put the market in a relatively cheery mood for the labor market outlook. There has been no shortage of positive or relatively favorable economic readings in recent days, indicating that the U.S. economic outlook is not really as grim as some of the more bearish calls are making us believe. If Europe can get around to putting its house in order, then we will have the makings of a solid rally in the market. But that is probably asking too much.