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Disappointing Jobs Data May Offset Optimism About Vaccine Rollouts

The major U.S. index futures have recently given back ground and are currently pointing to a roughly flat open for the markets on Wednesday.

The pullback by the futures came following the release of a report from payroll processor ADP showing much weaker than expected private sector job growth in the month of February.

ADP said private sector employment rose by 117,000 jobs in February after climbing by an upwardly revised 195,000 jobs in January.

Economists had expected employment to increase by 177,000 jobs compared to the addition of 174,000 jobs originally reported for the previous month.

"The labor market continues to post a sluggish recovery across the board," said Nela Richardson, ADP's chief economist. "We're seeing large-sized companies increasingly feeling the effects of COVID-19, while job growth in the goods producing sector pauses."

She added "With the pandemic still in the driver's seat, the service sector remains well below its pre-pandemic levels; however, this sector is one that will likely benefit the most over time with reopenings and increased consumer confidence."

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

Earlier, the markets seemed poised to benefit from optimism about the coronavirus vaccine rollouts after President Joe Biden said Tuesday the U.S. will have enough vaccine supply for every adult in America by the end of May.

Biden cited the emergency use authorization issued for Johnson & Johnson's (JNJ) vaccine as well as a collaboration between J&J and Merck (MRK) to expand production of the single-dose vaccine.

"When I came into office, the prior administration had contracted for not nearly enough vaccine to cover adults in America. We rectified that," Biden said. "About three weeks ago, we were able to say that we'll have enough vaccine supply for adults by the end of July.

He added, "And I'm pleased to announce today, as a consequence of the stepped-up process that I've ordered and just outlined, this country will have enough vaccine supply — I'll say it again — for every adult in America by the end of May. By the end of May. That's progress — important progress."

Stocks moved mostly lower over the course of the trading day on Tuesday, partly offsetting the rally seen on Monday. The major averages all moved to the downside, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages came under pressure going into the close, ending the day just off their lows of the session. The Dow fell 143.99 points or 0.5 percent to 31,391.52, the Nasdaq tumbled 230.04 points or 1.7 percent to 13,358.79 and the S&P 500 slid 31.53 points or 0.8 percent to 3,870.29.

Profit taking contributed to the pullback on Wall Street, with some traders cashing in on the strong gains posted during trading on Monday.

The S&P 500 posted its biggest single-day gain since last June on Monday, while the Dow and the Nasdaq also moved sharply higher following the starkly mixed performance seen last Friday.

The weakness on the day came despite a continued decrease by the yield on the benchmark ten-year note, which moved lower for the third straight session.

The ten-year yield spiked above 1.6 percent last Thursday, raising concerns about the outlook for interest rates despite the Federal Reserve's assurances monetary policy will remain unchanged for the foreseeable future.

Oil service stocks showed a substantial move to the downside on the day, dragging the Philadelphia Oil Service Index down by 3.4 percent. The index ended Monday's trading at its best closing level in a year. The sell-off by oil service stocks came amid a notable decrease by the price of crude oil.

Considerable weakness was also visible among semiconductor stocks, as reflected by the 3.1 percent slump by the Philadelphia Semiconductor Index.

Networking, biotechnology and software stocks also saw significant weakness on the day, contributing to the steep drop by the Nasdaq.

Meanwhile, gold stocks were among the few groups to buck the downtrend, with the NYSE Arca Gold Bugs Index soaring by 4.2 percent. The index bounced off its lowest closing level in over ten months.

The rebound by gold stocks came as the price of the precious metal snapped a five-day losing streak.

Commodity, Currency Markets

Crude oil futures are climbing $0.70 to $60.45 a barrel after sliding $0.89 to $59.75 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,713.50, down $20.10 compared to the previous session's close of $1,733.60. On Tuesday, gold rose $10.60.

On the currency front, the U.S. dollar is trading at 106.87 yen compared to the 106.69 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2050 compared to yesterday's $1.2091.

Asia

Asian stocks advanced on Wednesday as U.S. Treasury yields retreated and progress in U.S. stimulus talks underpinned optimism about the global economy.

Chinese stocks posted strong gains after the latest survey from Caixin showed the services sector in the country continued to expand in February, albeit at a slower pace, with a services PMI score of 51.5. That's down from 52.0 in January.

The benchmark Shanghai Composite Index jumped 68.31 points, or 2 percent, to 3,576.90, while Hong Kong's Hang Seng Index surged up 784.56 points, or 2.7 percent, to 29,880.42.

The private sector in Hong Kong moved into expansion territory in February, the latest survey from Markit Economics showed, with a services PMI score of 50.2, up from 47.8 in January. Individually, activity and new orders were down but at much weaker rates.

Japanese stocks gained ground as investors picked up cyclical stocks on hopes of a quicker economic recovery from the pandemic-led recession. The Nikkei 225 Index rose 150.93 points, or 0.5 percent, to 29,559.10, while the broader Topix closed 0.5 percent higher at 1,904.54.

Mitsui Engineering & Shipbuilding, Nippon Steel & Sumitomo Metal, JFE and Kobe Steel surged 6-9 percent.

The services sector in Japan continued to contract in February, albeit at a slower pace, the latest survey from Jibun Bank revealed, with a services PMI score of 46.3, up from 46.1 in January.

Australian markets ended notably higher after official data showed Australia's GDP rose 3.1 percent in the fourth quarter of 2020, a strong sign the economy is recovering from the coronavirus pandemic.

Meanwhile, the services sector in Australia continued to expand in February, albeit at a slightly slower pace, the latest survey from Markit Economics showed.

The benchmark S&P/ASX 200 Index climbed 55.70 points, or 0.8 percent, to 6,818.00, while the broader All Ordinaries Index ended up 58 points, or 0.8 percent, at 7,067.90.

Material stocks led the surge, with BHP, Rio Tinto, South32 and Fortescue Metals Group rising 2-6 percent. Gold miners Evolution Mining and Northern Star Resources jumped 3-4 percent as gold prices snapped a five-day losing streak. Tech shares underperformed with heavyweight Afterpay losing 2.2 percent.

Seoul stocks rose sharply to finish near day's highs amid eased inflation concerns. The Kospi soared 39.12 points, or 1.3 percent, to 3,082.99, with steel and tech stocks pacing the gainers on institutional buying.

Europe

European stocks are moving higher for the third straight day on Wednesday, with the latest PMI data and U.K. finance minister Rishi Sunak's budget speech in focus.

IHS Markit's final February Composite Purchasing Managers' Index for the eurozone economy rose to 48.8 from January's 47.8, while the services PMI has been finalized at 45.7, up slightly from January's 45.4.

Britain's treasury chief Rishi Sunak said in a tweet he will announce a three-part plan to "protect the jobs and livelihoods of the British people" when he delivers his budget to Parliament later in the day.

While the German DAX Index is up by 0.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index are both up by 0.3 percent.

Miners Anglo American, Antofagasta and Glencore have moved to the upside on hopes for a quicker economic recovery from the coronavirus pandemic.

Oil & gas firm BP Plc, Total SE and Royal Dutch Shell have also advanced as oil prices rise amid signs of progress in the Covid-19 vaccine rollout in the United States. Banks are also trading broadly higher.

British housebuilder Persimmon has shown a strong move to the upside despite reporting lower pre-tax profit and revenue in 2020.

Polymetal has also risen after it posted record high net earnings of $1.1 billion in 2020 on stronger global prices for precious metals.

Daily Mail and General Trust shares have also moved higher. The company said that its Consumer Media business, dmg media, has acquired New Scientist, a science publishing title, from a consortium of individual investors led by Bernard Gray, for 70 million pounds in cash.

Swiss logistics firm Kuehne + Nagel Group has also surged. After closing the year 2020 with a record operating result, the company said it looks forward to the year 2021 with confidence.

U.S. Economic Reports

Payroll processor ADP released a report on Wednesday showing private sector employment in the U.S. increased by much less than expected in the month of February.

ADP said private sector employment rose by 117,000 jobs in February after climbing by an upwardly revised 195,000 jobs in January.

Economists had expected employment to increase by 177,000 jobs compared to the addition of 174,000 jobs originally reported for the previous month.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of February.

The ISM's services PMI is expected to come in unchanged at 58.7, with a reading above 50 indicating growth in the service sector.

Philadelphia Federal Reserve President Patrick Harker is also due to speak on "Equitable Workforce Recovery" before a virtual 2021 AL DIA Roundtable: Back to Work at 10 am ET.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended February 26th.

Crude oil inventories are expected to dip by 1.9 million barrels after rising by 1.3 million barrels in the previous week.

Atlanta Federal Reserve President Raphael Bostic is due to speak on "How Inclusion Powers the Economy" before a virtual "Courageous Conversations With Greenberg Traurig" webinar at 12 pm ET.

At 1 pm ET, Chicago Federal Reserve President Charles Evans is scheduled to speak on current economic conditions and monetary policy before a virtual CFA Society Chicago: Distinguished Speaker Series.

The Federal Reserve is due to release its Beige Book, a compilation of economic evidence from the twelve Fed districts, at 2 pm ET.

At 6:05 pm ET, Dallas Federal Reserve President Robert Kaplan is scheduled to participate in moderated conversation on national and global economic issues before a virtual Global Perspectives series.

Stocks In Focus

Shares of Lyft (LYFT) are seeing significant pre-market strength after the ride sharing company forecast a narrower than previously expected first quarter loss after seeing its best level of ride volume since last March.

Casino operator Las Vegas Sands (LVS) may also move to the upside after announcing agreements to sell its Las Vegas real property and operations for an aggregate purchase price of approximately $6.25 billion.

On the other hand, shares of Wendy's (WEN) are likely to see initial weakness after the fast food chain reported weaker than expected fourth quarter results.

Discount retailer Dollar Tree (DLTR) may also move to the downside after reporting fourth quarter sales that missed analyst estimates.

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