The ADP Private Employment Report, which is simply an estimate of a portion of the federal government's Employment Situation Report, is giving lift to stocks Wednesday and might be enough to hold the day today, at least to 2:00 PM but maybe not 3:30. The data was better than expected, and due to its premarket release, gave traders a reason to put a positive spin on the day instead of questioning yesterday's record breaker. The SPDR Dow Jones Industrials (DIA) and the SPDR S&P 500 (SPY) each gained from the get go, but the PowerShares QQQ (QQQ) was less enthused, perhaps burdened by Dell (DELL), Apple (AAPL), Qihoo 360 Technology (QIHU) and Sohu.com (SOHU).
The ADP Report showed an increase of 198K net jobs in the private sector in February. The result was ahead of economist expectations for a 173K increase, but was less than the prior month revised count of +215K (revised from 192K). Because this data comes just two days before the real news and because it is often off from the reported result, it usually has little impact these days. However, today, when the market is seeking reason to confirm yesterday's record breaking move, it'll provide support at least through the morning.
Some of the drivers behind the indexes today probably include MGIC Investment (MTG), a company I once covered as an analyst. MTG is up 11% at the hour of scribbling here. The company has been getting a significant amount of media attention as a possible ancillary housing beneficiary, given its mortgage insurance business. I've noted the company receiving positive commentary regularly lately on CNBC, which can certainly be uplifting. Fresh from reporting results, Homeowner's Choice (HCI) is up 20% this morning. HCI offers a similar opportunity to MTG, given its work in property insurance.
Perhaps holding the NASDAQ back today, Dell , Apple , Sohu.com and Qihoo 360 Technology . After evaluating Dell's strategic alternatives, a special committee of Dell's board favors the plan for privatization of the company by Michael Dell and investment partners. I expressed concern in a recent article that such a deal might not reward DELL shareholders as well as the turnaround I expect will happen even as the company operates today. That's why I said DELL holders should retain their shares. DELL shares are down fractionally today, reflecting the limited upside for the shares given the stock's current premium to the offer price. The fact that the shares remain above that level, though, would imply investors generally believe the deal will not be consummated or will be altered or overwhelmed by another offer.
Apple is lower again today as well, and plays a significant role in the movement of the market and the QQQ due to its size and importance. AAPL is down nearly a full percentage point today, to approximately $427 at the hour of scribbling here. I'm currently working on a focus article on why and for how long Apple will drift lower; follow the column to see that in a timely fashion near-term. Other significant NASDAQ decliners today were Sohu.com , which is lower by roughly 8% in early trading and Qihoo 360 Technology , down roughly 7%. QIHU was lower on an analyst downgrade, while SOHU was backing off gains after denying reports it might be sold or go private.
The market faces its greatest challenge at 2:00 PM when the Fed's Beige Book is published, but as it is an economic perspective of a regional Fed bank, and not broad monetary policy, it should not affect stocks. That said, it could and so the report demands investor attention. What could play the most significant role in stymieing this market rally is simply the end of the day, when traders sell daily positions.