The monthly Employment Situation Report is the hands down driver of stocks today, and the news was mixed. While nonfarm payrolls increased, supported by the private sector, the unemployment rate deteriorated. That had futures higher after the news and the SPDR S&P 500 (SPY) trading up 1.2% in the premarket, SPDR Dow Jones Industrial Average (DIA) up 1.0% and the PowerShares QQQ (QQQ) up 1.3%. We'll also receive an important service sector measure this morning that could have some impact on stocks. The news from the corporate sector highlights an earnings beat from Procter & Gamble (PG) with its shares higher in the early morn, and Knight Capital (KCG) is trading sharply higher with LinkedIn (LNKD) and OpenTable (OPEN).
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The Employment Situation Report offered mixed information this morning. The report for July showed a 163K increase in nonfarm payrolls, which was better than the economists' expectation for 100K, according to Bloomberg's survey. Unfortunately, June was revised lower, to 64K, from the 80K initially reported. The unemployment rate deteriorated to 8.3% in July, from 8.2% in June, missing economists' expectations for 8.2%. Private nonfarm payrolls did relatively well, rising 172K, against economists' expectations for a 110K increase and better than ADP's forecast for 163K increase; so ADP didn't cry wolf (or dove this month) after all. Unfortunately, I see labor deteriorating in the months ahead, as the economy pressures employers to cut costs.
When reported this morning, the Monster Employment Index (MEI) will take a back seat to the government data. The MEI measures online job search activity and so is an important measure of labor, though I haven't found it insightful outside of its anecdotal play. In other words, it cannot gain a voice today for stocks, given the volume of the government report.
ISM reports its Non-Manufacturing Index at 10:00 AM, with expectations set for a slight decline to 52.0, from 52.1 in July. This report is more important than ISM's manufacturing data, because 90% of the American economy is driven by the service sector. However, the market mostly focuses on the manufacturing data, and so this index also sits behind the employment report in terms of market importance this morning. Over time though, it will be noted by influential market participants and media, and will affect the shares you trade.
Knight Capital Group is looking up 5% in the premarket, after tanking the last few days on worry about its status as an ongoing concern. The company's fate remains unsure, as it seemingly desperately opens its books up to potential saviors, its reputation tarnished by the flaw in its trading system this week. Private equity firms and at least one rival are speculated to be among its potential suitors.
Procter & Gamble reported this morning, and was up almost 2% in premarket trading. P&G posted EPS before the proceeds of its snacks business sale of $0.82, well ahead of the analysts' consensus for $0.77. The company set its fiscal year guidance range at $3.80 to $4.00, which incorporates Wall Street's consensus for $3.92. Consumer staples like P&G tend to garner capital in hard times, and the company's expansion efforts in emerging markets support growth. Thus, the shares are looking higher today.
The rest of the day's corporate earnings schedule, which could prove influential for all stocks, has key news from Viacom (VIAB), NYSE Euronext (NYX), The Washington Post (WPO), EOG Resources (EOG) and Agrium (AGU.TO). Look also for earnings from Allianz SE (ALV.DE), Beazer Homes (BZH), Gartner (IT), Immunogen (IMGN), Royal Bank of Scotland (RBS), Tsakos Energy Navigation (TNP) and Wellcare Health Plans (WCG).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.