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Stocks were just about flat on the day by early afternoon in New York, after sinking into the red for much of the morning, while the US dollar lost ground against the euro and the Japanese yen. The Dow was up 0.13% or 20 points at 15,465, bouncing back well having been down more than 100 points earlier, though the S&P 500 was down 0.08%.
As the US braces itself for another winter storm, the weather is playing an increasingly large part in the short-term direction of financial markets. December’s employment data seemed to be adversely affected by the heavy weather before Christmas and with a softer ADP employment report earlier, it looks like we might be facing a similar story again.
ADP estimates that private payrolls increased by 175,000 in January, just below the 180,000 forecast by a Reuters poll, and well down on the revised 227,000 figure that ADP now has for December. As I have said before, I don’t have too much faith in the ADP report as a useful predictor of the official government data. ADP’s original estimate of 238,000 for December was woefully off the mark and sadly that was a recurring theme throughout much of 2013 (ADP’s revised figure of 227,000 for December is still a huge way off the 87,000 reported by the government for private payrolls).
Reliable or not, the slightly below-par nature of the ADP data has resulted in some dollar weakness, with the eyes of the market now focused on Friday’s official employment report. USD/JPY dropped back 0.2%, while the euro gained 0.12% against the dollar.
The other major report of the day was the ISM non-manufacturing index for January, which rose to 54.0 from the level of 53.0 seen in December, which is a reasonably optimistic sign. Non-manufacturing makes up the bulk of the US economy and, based on this data, appears to have expanded at a faster pace last month despite the havoc wrought over a significant portion of the country by the polar vortex. The softness in Monday’s ISM manufacturing report raised fears that the weather had ground the pace of the economy down substantially, but this report will help assuage those concerns.