Waiting Game: Market Treads Water Ahead of ECB Meeting, Jobs Data

For the first time since January, the S&P 500 Index (SPX) has fallen two days in a row, and futures pointed toward a lower open Wednesday. What’s bogging down the rally?

It looks like we’re playing a waiting game the next day or two, heading into both a European Central Bank (ECB) meeting scheduled for Thursday and the monthly U.S. payrolls data on Friday. With those two major things happening back to back, no one seems anxious to be a hero, so to speak, which could be getting in the way of buying interest.

Speaking of payrolls, ADP reported Wednesday that the private sector added 298,000 jobs in February. That was way above expectations. The quality of jobs in the ADP report looked good, with construction and manufacturing positions both gaining substantially. But the government report is where investors should look for proof of those big numbers.

There’s still some trepidation about a March rate hike, should it occur. Futures prices project an 81% chance, and about 50-50 odds of the Fed coming through on its promise of three rate hikes by the end of the year. The dollar strengthened early Wednesday and has been climbing since last week’s hawkish talk from the Fed. That in turn, seems to have put pressure on gold.

And the high-flying financial sector fell again Tuesday after Monday’s moderate losses, hurt in part by news that German lender Deutsche Bank planned to raise $8.5 billion to boost its capital position and has set new financial targets. European banks and their woes have been popping in and out of the news for several years now, and the Deutsche Bank development served as a reminder that Europe’s economy may not be out of the woods.

Early Thursday, investors might want to listen for the ECB’s latest words on how the European economy is performing and on future interest rate policy. The ECB meeting could affect U.S. overnight trading, so it could be prudent to stay on the lookout. The question is what ECB President Mario Draghi might say about economic improvement and inflation expectations. Analysts don’t expect any change in current interest rates.

The energy sector fell nearly 1% on Tuesday, and crude futures dropped toward the lower end of their recent range early Wednesday ahead of the weekly U.S. production and stockpile numbers. An industry report on oil inventories late Tuesday showed a huge weekly rise of more than 11 million barrels, though gasoline stocks fell. And China said its oil demand fell slightly.

Another Reason Stocks May Be Falling

For a while now, many investors have eagerly awaited the new administration’s tax and infrastructure plans, and the recent rally may have been connected at least in part to hopes of action on those fronts. President Trump promised last month to soon deliver “phenomenal” tax policy, but details still are unknown. Markets aren’t known for their patience, or investors for their optimism. The longer people have to wait to hear about the tax plan, the more nervous they get.

Watch Initial Claims Tomorrow

Last week, the government reported that initial jobless claims fell to 223,000, the lowest since 1973. Coming up Thursday morning is the final weekly jobless claims report before Friday’s key February jobs report, and analysts’ consensus is for claims to rise to 240,000, Briefing.com said, which remains historically low. The question is whether the light claims numbers could mean an improving jobs picture. Friday morning’s jobs report could provide the final piece of that particular puzzle, and some analysts have raised their estimates to 200,000, which, if it happens, would be the second-straight month of 200,000 jobs added to the economy. And don’t forget to watch what wages did in February, as well. Many analysts expect a slight rise.

Retirement Considerations

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