Stock futures rose modestly yesterday as investors grow hopeful that the U.S. recovery remains on track.
The market will try to build on a late-day rally that sent the Dow Jones industrial average up 225 points Wednesday. It was the second straight day investors made big moves in the waning moments of trading. On Tuesday there was a steep sell-off just before the close.
Investors are buying stock futures ahead of five key reports that should provide a sweeping view of the health of the domestic economy. Reports are expected to show the jobs market, service industry and manufacturing sector are all improving.
Ahead of the opening bell, Dow Jones industrial average futures rose 34, or 0.3 percent, to 10,266. Standard & Poor’s 500 index futures climbed 4.10, or 0.4 percent, to 1, 1 00.80, while Nasdaq 100 index futures rose 4.25, or 0.2 percent, to l,883.25.
A key report on the service sector is expected to show growth for fifth straight month. The Institute for Supply Management’s service sector index likely crept higher to 55.5 in May from 55.4 a month earlier, according to economists polled by Thomson Reuters. Any reading above 50 indicates growth.
The report, due out at 10 a.m. EDT, is considered a key gauge for the health of the jobs market because the service sector accounts for 80 percent of all workers outside of farmers.
A recovery in the service sector has been a bit slower than manufacturing, so continued signs of improvement should provide investors with confidence that the economy is strengthening.
High unemployment remains a key obstacle for a strong recovery. Upcoming jobs reports are expected to show some continued improvement.
Economists predict fewer people filed for jobless claims for the first time last week. The Labor Department is expected to say initial claims for unemployment benefits fell to 450,000 last week from 460,000 a week earlier. The report is due out at 8:30 a.m. EDT.
It would mark the second straight weekly decline in claims. However, claims still remain above the level that economists say would indicate sustained jobs growth.
Payroll Company ADP is expected to report private employers added 60,000 jobs in May. That compares with 32,000 jobs added in April.
The ADP report, due out at 8:15 a.m. EDT, comes a day ahead of the Labor Department’s key jobs data. ADP data is often considered a barometer for the strength of the government’s report. However, Friday’s jobs report provides a fuller picture because it also includes public sector employment.
Economists forecast 513,000 jobs were added in May, compared with 290,000 added a month earlier. It would be the biggest jump in 26 years, but as many as 300,000 of the workers hired in May are expected to be temporary positions to help conduct the U.S. census.
Hiring has not picked up on a sustained basis because companies are finding ways to become more efficient. Economists forecast a separate Labor Department report on Thursday will show productivity grew at an annual pace of 3.4 percent during the first quarter. That’s slightly below a previous estimate of 3.6 percent, but still indicates companies’ output is growing for every hour worked. The report is due out at 8:30 a.m. EDT.
Increasing productivity has boosted the manufacturing sector, which has shown consistent growth coming out of the recession. Economists forecast factory orders rose 1.8 per cent in April after climbing 1.1 per cent in March.
There is some trepidation that the manufacturing sector could face a slowdown because of the rising dollar and a potential slowdown in Europe’s economy. A stronger dollar makes it more expensive to sell U.S. produced goods overseas. Also, demand could drop in Europe where countries like Greece, Spain and Portugal are wrestling with mounting debt problems.
The euro remained above a four-year low it hit on Tuesday. The euro, which has become an indicator for confidence in Europe’s economy, was flat at $1.2247. It has been trading in a tight range throughout the day.
With investors moving into riskier assets, bond prices fell. The yield on the benchmark la-year Treasury note, which moves opposite its price, rose to 3.39 percent from 3.35 percent late Wednesday.
Overseas, Britain’s FTSE 100 gained 1.7 percent, Germany’s DAX index rose 1.8 percent, and France’s CAC-40 climbed 2.3 percent. Japan’s Nikkei stock average rose 3.2 per cent.