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Pre-Market Primer: Private Job Growth Jumps; US Economy Grows Faster Than Expected


Today's ADP employment report bodes well for the big jobs report later this week.

Stocks drifted between gains and losses this morning as investors digest a bevy of key economic data points and a Federal Reserve announcement.

This morning, the Labor Department reported that GDP increased by 1.7% in the second quarter. This was well above the median economist estimate of 1%, but still below the long-term average.

Comparing today's report to previous headlines is misleading, however, since the Labor Department made benchmark revisions of GDP going all the way back to 1929 to include research and development as a business investment and also count artistic goods as a part of the economy.

ADP, the payroll processor, reported that US private sector companies added 200,000 jobs, beating economists' expectations by 20,000. This is a good, but usually unreliable preview for this Friday's jobs report, where a net gain of 185,000 new jobs is expected.

Before the opening bell, major US indices pointed to a lower open. Dow (INDEXDJX:.DJI) futures were down 0.11% to 15,476 while futures contracts on the S&P 500 (INDEXSP:.INX) sank 0.04% to 1,684.00 and Nasdaq (INDEXNASDAQ:.IXIC) futures ticked up 0.01% to 3,085.75.

At 2:00 p.m. today, the Federal Reserve will make an announcement following its policy meeting. Fed watchers don't expect any changes to interest rates or asset purchases this time around.

European stocks are mixed after a report showed that eurozone unemployment fell for the first time in two years. In June, the total number of jobless people decreased by 24,000. This wasn't enough to dent the 12.1% unemployment rate, but it could signal that the region might have already found the bottom. Youth unemployment, however, rose to 23.9% from 23.8% in May. Spain's under-25s were worst off with 56.1% unemployment. Eurostat also released July inflation, which stayed at the same 1.6% annual pace as June.

Japanese equities dove, with the Nikkei (INDEXNIKKEI:NI225) sinking 1.45%. Japan's PMI manufacturing index came in much lower than expected in July. The index printed 50.7, just barely over the 50 threshold that indicates growth in the sector. Economists expected it to rise to 52.5 from 52.3 in June.

Hedge fund manager Bill Ackman has made his largest investment ever, a $22 billion stake in Air Products & Chemicals (NYSE:APD). After the investment was reported on CNBC, shares jumped 4.63%. Ackman is currently under pressure since his massive short of Herbalife (NYSE:HLF) from last fall has so far worked against him.

Mastercard (NYSE:MA) posted a 21% rise in profit, beating expectations as more consumers used credit cards to make transactions. Revenue rose 15% to $2.10 billion and net income rose to $848 million or $6.96 per share, beating expectations by $0.66.

Yelp (NYSE:YELP), the local business ratings company, reports earnings after the bell today. Analysts expect Yelp to narrow its loss from $0.22 per share to $0.03 as it continues to grow revenues. The San Francisco-based company's valuation has risen 122% so far this year.

Twitter: @vincent_trivett
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