Stocks Close Down but Well off Session Lows
Stocks began the US trading session on the defensive as private payrolls came in slightly less than expected. Economic data continues to reflect a weakening US economy, as traders look forward to Friday’s government employment report. Euro zone data came in mixed, which failed to help European equities gain momentum. After hitting a session low in the morning stocks moved higher and for most of the session the Dow was in the black. All three major indexes close down less than 0.5%.
Prior to the opening bell, Automatic Data Processing and Macro Advisors released their private non-farm payroll report. According to ADP private payrolls increased by 175,000 in January compared to the 189,000 expected by economists. The biggest gain came in the service sector which increased by 160,000. The goods sectors increased by 16,000, while small business increases increased by 75,000. Revisions were a non-event which calls into question the governments December report. Recall that December’s non-farm payroll report released by the Bureau of Labor Statistics came in at 75,000 much lower than expected and investors are attempting to determine if ADP will foreshadow a revision. The ISM services number seemed to turn sentiment around. The 54 print was better than expected, but showed that the weak ISM manufacturing print might have been a weather event.
Eurozone composite PMI rose to 52.9 in January from 52.1 in December as the services print edged up to 51.6 from 51. Spain’s composite PMI hit a 6 1/2 year peak of 54.8, reflecting the strongest cycle of expansion since 2007. Unfortunately, any positive sentiment was removed after the release of EU retail sales. Eurostat reported that retail sales volumes in the union dropped a greater-than-expected 1.6% month over month in December after rising 0.9% in November. Consensus was for a drop of 0.5%.
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