Earlier in the session, the Dow was deeply in the red, down more than 100 points, but the index has bounced well off those lows, and by early afternoon in New York it was off by 0.48% or 79 points.
The S&P 500 was flat, suggesting that the Dow’s declines are not representative of the wider economy, more a skewed result peculiar to the Dow’s limited composition of stocks, with sizeable falls in Chevron, Disney and IBM responsible for a large part of the drag.
The Dow’s struggles today came despite ADP’s employment report yielding positive indications for December. ADP estimates that private payrolls grew 238,00 last month, comfortably exceeding analysts’ consensus estimate of 205,000. In addition, November’s gain was amended up to 229,000 from 215,000.
The official government private payroll number was 196,000 for November, thus showing the divergence that undermines the ADP report’s importance. These quibbles aside, the upward trend in ADP’s numbers should kindle some optimism in the market for Friday’s non-farm payrolls.
Continuing improvements in the labour market would reinforce the Fed’s decision to reduce its stimulus this month and usher in the likelihood of further tapers at forthcoming FOMC meetings. As stimulus should act to debase the dollar over a time, a scenario of on-going and fairly prompt tapering is dollar positive.