Strong ADP Report Supports Further Tapering
Stocks opened on a down note, but the strong ADP payroll report helped give stocks a boost. The Nasdaq reversed its early losses and is trading in positive territory currently while the S&P 500 is basically flat. The Dow is lower on the day so far.
Chips stocks got a boost from a better than expected earnings report from Micron (MU), and they are helping the Nasdaq outperform today.
In economic news, the strong ADP Employment report showed that 238,000 nonfarm jobs were added, above expectations for closer to 200k additions.
Treasuries reacted to the news by selling off, and that pushed the yield on the 10-year Note up 6 basis points to 3.00%.
Commodities are also mostly lower with gold prices trading down to $1221 and oil prices easing back near $93.
The volatility index is only fractionally higher to the 13.0 level, still a very low absolute level and not indicative of traders anticipating a lot of near-term volatility.
Asian markets ended mixed overnight. One of China's big banks said it expects the country's GDP to grow 7.8% in 2014. Money market rates in China eased further, with one-month SHIBOR falling 27 bps to 5.65%.
European markets are lower on the day. Eurozone retail sales rose 1.4%, above expectations. Italy's unemployment rate rose to 12.7% from 12.5%. And reports suggest the IMF plans to upgrade its forecast for global growth.
Trading comment: The stock market again seems to be exhibiting behavior we saw last year when it often worked off its overbought conditions by trading in a sideways consolidation fashion rather than the sharp pullbacks that were more characteristic of the 2010-2012 timeframe. I think a lot of investors were hoping for a pullback early this year to add to equities. But the longer the market trades sideways like this the higher the chances of another breakout to new highs and that could pull additional buyers in off the sidelines as they fear another year of underperformance and being left out of the bull market.