Nonfarm Payrolls (APR) (12:30 GMT; 08:30 EST)
Average Hourly Earnings (MoM) (APR) (12:30 GMT; 08:30 EST)
How Will The Markets React?
The moment of truth has arrived. After a week of market-moving indicators falling to the wayside, traders may finally have their chance to make big moves in the wake of the monthly nonfarm payrolls report. Over the past few sessions, fundamental pressures have built up behind treasuries and the dollar since the market was forced to absorb the typically market-moving ISM manufacturing and services releases as well as the Fed?s preferred PCE data. While there will certainly be some latent positioning on earlier releases, NFPs will certainly be the trigger and immediate driver for the morning session. Heading into the release, there are as many estimates for the payrolls figure and the market?s subsequent price action as there are traders. Despite the varying opinions, everything will be benchmarked first and foremost on the official consensus from economists. Though it has not been updated since a number of periphery employment indicators have peppered the wires, the 100,000 Bloomberg estimate still stands as the anchor. Working a little more with the data available though, traders may be looking for a number a little south of this figure. Keeping the number propped up in positive territory are the employment components of the ISM manufacturing and services reports. The factory number?s reported a rebound to positive territory, suggesting firms are hiring after an extended period of cost cutting and inventory burning. Accounting for a far-greater portion of the labor market, the service-based firms modestly increased their ranks. Standing in direct contrast to these two encompassing numbers were the higher frequency and proprietary numbers. First time jobless claims may have improved last week, but the four-week average was at highs for most of the month. More straightforward in their assumptions (and perhaps less accurate), the ADP private payrolls report hit a four-year low while the Challenger Job Cuts survey post its first increase in seven months.
[B]Bonds - Treasury 10-Year Note Futures
T-Notes have tracked back and forth for the past few weeks with no hope for a breakout move either way. However, the range that has formed in the active futures contract is certainly not equipped to handle heavy volatility - and if anything one indicator has proven that it can generate considerable movement, it is the NFPs release. Treasuries traders are heading into the release with conservative estimates on the jobs report. If the number falls in line with expectations at 100,000, it would help confirm that labor trends are stabilizing. Such a scenario would likely kill any chance for a breakout this week. Alternatively, a strong positive surprise could drive the T-note through 107-24, while a weak number could carry it through 108-11.
FX - EUR/USD
The EURUSD awaits an estimated decline in Non-Farm Payrolls to 100K, and the price action that ensues could be ugly. Indicators such as ADP Employment and Challenger Job Cuts have pointed towards a disappointing NFP release near or below forecasts. However, the US dollar has strengthened over the past few days, sending EURUSD down to support near 1.3550, as the employment components of both ISM Manufacturing and ISM Non-Manufacturing improved, boding well for NFP?s. As a result, it appears that there is major opportunity for a surprising release, and markets may suspect that analysts are low balling the labor market figure. Moreover, many traders are looking for a sustained turn in not only EURUSD, but pairs like GBPUSD, AUDUSD, and NZDUSD, so trading the report should be done with caution as volatility is likely to spike. If we see NFPs below expectations, EURUSD may easily return to its highs near 1.3680. On the other hand, a jump in payrolls would give a much needed boost to dollar sentiment and send EURUSD railing down through 1.3545.
Equities - S&P 500 Index
Better-than-expected gains in US productivity and the services sector pushed the S&P 500 Index above 1500 for the first time since September 2000 while the Dow Jones Industrial Average gained to a third straight record. In fact, the S&P 500 increased 0.4 percent to 1502.39 as the Dow industrials added 0.2 percent to 13,241.38. Financial shares accounted for almost a third of the S&P 500’s advance after profit at Unum Group, the largest disability insurer, topped forecasts and sent prices up 9.7 percent to $27.33 - a five year high. Meanwhile, Symantec Corp. led technology shares higher after fourth-quarter profit at the anti-virus software maker hit a stronger-than-estimated 24 cents a share. Shares of Symantic jumped 88 cents to $19.05.
The New York opening of US equity markets could be quite volatile Friday morning on the release of the notoriously market-moving and difficult-to-handicap Non-Farm Payrolls report. The figure is anticipated to ease back, but indicators like ISM Manufacturing and ISM Non-Manufacturing point to an improvement, ramping up speculation for signs that the labor market remains surprisingly strong. Should we see a jump in NFPs, US equities could continue to reach for new records as traders will consider employment conditions and the average consumer resilient. On the other hand, if NFPs drop in line with estimates or fall even lower, the S&P and Dow could be in danger of losing their record highs as fears of a hard landing would be reignited.