The Market Today

ADP Paints Different Picture of Labor Market Than Jobless Claims Data

by Craig Dismuke, Dudley Carter


Vining Sparks Coronavirus Chartbook (PDF) (Link) (Updated by 9:00 a.m. CT)

Monitoring the Headlines: It was another quiet day for virus-related headlines as most of the focus remained on developments related to the protests and unrest across the country. However, the topics have begun to overlap in some instances. New York City Mayor De Blasio said June 8 remained the target date for beginning to ease lockdown restrictions, while also announcing that the curfew aimed to quell violence that damaged several Manhattan businesses on Monday night would be extended through Sunday and take effect earlier in the day. Governor Cuomo said the NYPD must put an end to the looting and other criminal activity, while also announcing day camps across the state could open June 29. Elsewhere, Chicago’s Mayor said phase three of the city’s re-opening plan will begin today.



ADP Payroll Report Paints Different Picture Than Jobless Claims Data: ADP’s private payroll report showed 2.76 million lost private payrolls in May versus expectations for 9.00 million lost payrolls.  ADP reports on the number of private payrolls through the week which includes the 12th day of the month.  In May, this would include the week ending May 15th.  Initial jobless claims cumulatively reported in the nine weeks leading up to the May 15 reference week totaled 38.6 million.  Prior to today’s report, ADP had shown 19.9 million lost payrolls.  As such, expectations were for another almost ten million lost payrolls.  Now, through May, ADP has shown just 22.6 million lost private payrolls. The two reports are painting an obviously different picture of the duration of the job loss.  The BLS’s nonfarm payroll report has shown just 21.4 million lost jobs through April with the May report due out Friday.

Mortgage Purchase Applications Continue Higher:  Mortgage applications for the week ending May 29 fell 3.9%; but, purchase applications rose for a seventh consecutive week, up another 5.3%.  Purchase applications are now up 62% over the past seven weeks portending imminent improvement in the housing sales data.  Applications for refinance fell another 8.6% and are down 51% from their peak back in early March.

Services PMIs and Factory Orders Report: At 8:45 a.m. CT, the Markit Services and Composite PMIs are expected to show incrementally better activity in May.  Additionally, the ISM Non-Manufacturing Index for May is expected to show similar results at 9:00 a.m.  Finally, the April Factory Orders report is expected to show another disastrous month with orders collapsing falling another 13.4%.


Equities and Yields Rose in Relatively Uneventful Trading: U.S markets didn’t move much during most of Tuesday’s domestic session as a nearly empty economic calendar and dearth of meaningful headlines left investors with little new information to alter the current outlook. The ratcheting up of U.S.-China tensions and domestic unrest have blemished the optimism around economic re-opening and stabilization, but has not yet derailed equities’ upward trajectory from late-March lows. The S&P 500, which closed at a 13-week high, held a roughly 0.4% gain for most of the day before surging in the final minutes without a clear catalyst to finish up 0.8%. All eleven sectors gained with energy out front and other cyclicals close behind. Oil prices rallied more than 3% to a near-three-month high on hopes for continued improvement in demand and an extension of the supply cuts implemented by OPEC and friends. Treasury yields remained relatively boring with a 0.6-bp increase in the 2-year yield to 0.16% and the 10-year yield finishing 2.6 bps higher at 0.69%.


Global Equity Rally Persists: The ongoing rally in global equities extended into Wednesday as investors remained hopeful in economic recovery from the worst contraction the world has seen since the Great Depression. The damage has reached around the globe as evidenced by this morning’s U.S. ADP report showing millions more Americans lost their jobs in May and Australia’s GDP data showing a 0.3% contraction in the first quarter. However, as was the case with Monday’s update on global manufacturing activity, more timely and forward-looking PMI data for May showed some improvement for global services sectors after April’s historic collapse.

Global Services Began to Recover: Most surprising was a private survey of China’s services business activity showing a swift and sharp recovery. The Caixin PMI jumped from 44.0 to 55.0, leaping past the 47.3 expected to its highest level since 2010. While activity in other countries remains far below pre-pandemic levels, the general theme was also improvement with every major European country registering a better-than-expected result for May. Wednesday’s risk-on tone boosted stocks in Asia and Europe by around 1.1%, safe haven currencies slipped with gold, and sovereign yields moved exclusively higher. After this morning’s surprisingly small contraction in private U.S. payrolls, S&P 500 futures were up 0.6% and the 10-year Treasury yield was 2.3 bp higher at 0.71%, both new highs for the day.

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