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Important Data Precedes July 4, 2014 Holiday

David Becker
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U.S. markets will be closed on Friday for Independence Day, with an early close in on Thursday. Data over the 4-day week includes some of the most important indicators for the month and will be crucial for the near term outlook. Fears of a more sluggish than expected recovery from the 2.9% drop in Q1 GDP were exacerbated by a smaller than expected increase in personal spending for May.

While this week’s key numbers should support improving growth outlooks, they aren’t likely to alter views that the FOMC will keep rates near zero for many more quarters to come.

Because the markets are closed on Friday, the all-important employment report will be moved up to Thursday. Analysts are forecasting at least a 200k increase in June jobs which would be a fifth straight monthly increase. Since many of labor market indicators have been flashing strength, another 200k+ figure would not surprise. Hence what could be most important in this report is the wage number, especially after Fed Chair Yellen registered her disappointment with earnings. The unemployment rate is likely to hold at 6.3%.

Other key data this week includes the manufacturing (Tuesday) and services (Thursday) PMIs, along with the Markit PMIs. The ISMs are likely to show some slowing in the rate of expansion, though the overall pace remains solid. A small dip to 54.5 is projected for the June manufacturing index, versus 55.4 in May, which was the best since December. The June services index is forecast at 55.5 versus 56.3 in June. The June Chicago ISM (Monday) also is expected to slid to a 60.0 after the index jumped 2.5 points to 65.5 in May. June vehicle sales (Tuesday) will also be important for the spending outlook. The ADP private payrolls survey (Wednesday) is seen increasing a solid 205k after the disappointing 179k gain in May, as the ADP data continue to under perform the BLS measure by 29k.

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