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Macro View

Favorable manufacturing data out of China and Europe appears to have put U.S. stocks in a positive mood today even as we wait for a key manufacturing report of our own a little later. The market will also be trying to handicap the all-important jobs report on Friday from this morning’s in-line reading from payroll processor Automatic Data Processing (ADP - Analyst Report).

A total of 170K private sector jobs were in created in January according to the ADP, matching expectations. On the negative side, the jobs numbers for December were revised downwards by 33K to 292K. The big deceleration from the December notwithstanding, the ADP report is still ahead of expectations for private sector jobs in Friday’s government jobs report.

The gains were broad-based across industries and business sizes. More than half of the January job gains came from small businesses with fewer than 50 employees. Medium-sized businesses, those with less than 500 employees, accounted for most of the rest of the gains.

The ADP tally sets the tone for Friday’s government jobs report, which is expected to show headline job gains of around 130K. The drop from the December level, when 200K jobs were created, primarily reflects the reversal of one-time gains that month due to seasonal factors. The overall trend on the labor market front remains favorable as confirmed by the steady downtrend in the weekly Jobless Claims data. I would expect the employment component of the manufacturing ISM report, coming out a little later, to show the same trend.

On the earnings front, we have Whirlpool (WHR - Analyst Report), the maker of Maytag and KichenAid branded home appliances, come out with better-than-expected recurring earnings this morning on roughly in-line revenue numbers. IAC Interactive (IACI - Snapshot Report) beat earnings and revenue expectations.

But the focus today will be Amazon’s (AMZN - Analyst Report) underwhelming report after the close on Tuesday as the online retail giant continued to invest in its own business. The company has quite a reputation for sacrificing near-term profits for long-term growth, and that appeared to be the theme in this quarterly report as well. In other corporate news, the pending tie-up between NYSE Euronext (NYX) and Deutche Borse was nixed by EU regulators on anti-trust grounds.

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