Stocks are set to extend yesterday's declines after a disappointing report on the job market and continued economic misery in Europe.
In a preview for Friday's key government non-farm payrolls report, the payroll processor ADP
(NASDAQ:ADP) tallied just 135,000 new private-sector jobs in May, versus 171,000 expected. Small businesses did the most hiring, adding 58,000 workers. Medium and large businesses both hired just 39,000.
Later this morning, April factory orders and the May ISM non-manufacturing index come out. Economists expect orders to have grown 1.4% after March's 4% fall. The service sector is expected to show stronger growth, rising to 53.8 from 53.1 in April.
The Federal Reserve's Beige Book, a compilation of anecdotal signs of the economy's health, comes out in the afternoon. This one carries considerable weight because it hints at the tone of the next Federal Open Markets Committee meeting two weeks from now, where the Fed might vote to taper off stimulus.
Before the opening bell, futures pointed towards a rough trading day. Dow
(INDEXDJX:.DJI) futures are off 0.38% at 15,121. S&P 500
(INDEXSP:.INX) futures fell 0.46% to 1,623.70 and future contracts on the Nasdaq
(INDEXNASDAQ:.IXIC) index climbed 0.39% to 2,963.25.
Japanese Prime Minister Shinzo Abe unveiled the "third arrow" of his ambitious plan to end the deflationary spiral and revive the country's economy. The plan involves special economic zones, privatization of public assets, returning to nuclear power, cutting corporate taxes, and reforms of the labor and power markets. As reported earlier, public pensions will get back into stocks. Abe's target is for 2% annual GDP growth over 10 years. Investors found the plan underwhelming, however, and the Nikkei
(INDEXNIKKE:.NI225) plunged 3.83%.
European shares are also down sharply today on the heels of more ugly economic data. The eurozone's collective GDP fell 1.1% year-over-year in the first quarter, confirming the eurozone recession. Retail sales in the region fell 0.5% in April. Markit's May service sector PMI readings showed contractions in several key countries. Spain's reading came in at 47.3, the 23rd straight month of declines. (Readings below 50 signify a downturn in the sector.) Italy's services fell to 46.5 from 47 in April. Germany weakened to 49.7 and France was unchanged at 44.3.
Despite this, Latvia was approved as the 18th member of the eurozone after the European Central Bank signed off on its application. The ECB was concerned, however, about the alarmingly high levels of foreign deposits in the country, especially from Russia. Non-resident deposits are near 50% of the total. Olli Rehn, the European Commissioner for Economic and Monetary Affairs, allayed fears that Latvia could be a repeat of the Cyprus debacle. In a press conference, he pointed out that the banking sector in Latvia is only about 150% of GDP, whereas it is 800% of the Cypriot economy. Latvia could adopt the common currency as early as January.
The US International Trade Commission gave Samsung
(KRX:05930) a small win over Apple
(NASDAQ:AAPL). The ruling
bars the 3G models of the first two iPads as well as the iPhone 3GS and 4 for violating a standards-essential patent owned by Samsung. Apple shares fell 0.5% in the pre-market despite some of those barred models being discontinued.
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