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Jul 7, 2016

U.S. Stock Market Indications Update - July 7, 2016: U.S. Stock Futures Pare Loses as ADP Overshadows Brexit

U.S. stock futures trimmed early losses Thursday after a duo of stronger-than-expected reports on the U.S. labor market helped assuage investors’ worries over Brexit, or Britain’s vote to exit the European Union.
Private-sector employment picked up a bit in June, suggesting the weak May nonfarm payroll report may be an anomaly, Automatic Data Processing Inc. reported Thursday. And initial jobless claims fell last week to a nearly three-month low, showing no evidence of rising layoffs. And a rise in crude-oil futures helped propel energy companies higher premarket after data showed a drop in crude stockpiles.
Futures for the Dow Jones Industrial Average YMU6, -0.05%  slipped 6 points, or less than 0.1%, to 17,828, while those for the S&P 500 index ESU6, -0.06%  dropped one point to 2,093. Futures for the Nasdaq-100 index NQU6, +0.01%  inched higher by a point to 4,441.

Analysts use ADP’s data to get a feeling for the Labor Department’s official jobs report, which will be released Friday and covers government jobs in addition to the private sector. The June employment report is viewed as a crucial gauge of the health of the economy after last month’s report showed that the U.S. created just 38,000 jobs in May—representing the slowest pace of growth in five years.
The most important question for the market is “whether last month’s disastrous number was an anomaly or a trend,” said J.J. Kinahan, chief strategist at TD Ameritrade.
The ADP report suggested the U.S. economy “is moving in the right direction,” Kinahan said, but it will take more than just one good report for the Federal Reserve to consider raising interest rates.
“The Brexit vote alone is likely to deter [the Fed] from raising rates until at least the end of the year as they wait to see what the knock-on effects will be, both from an economic and financial markets perspective,” Craig Erlam, senior market analyst at Oanda, said in a note.
On Wednesday, stocks rose for the first session after investors returned from the Independence Day holiday to Brexit-related losses on Tuesday. A stronger-than-expected report on nonmanufacturing activity and dovish Federal Reserve minuteshelped nudge investors back into equities on Wednesday. The S&P 500 DXY, -0.16% ended up 0.5%, while Dow industrials DJIA, +0.44%  rose 0.4%.
Oil boost: Oil prices also rose, building on a gain from Wednesday, after data from American Petroleum Institute showed crude supplies fell 6.7 million barrels for the week ended July 1. Analysts had forecast a 2.6 million-barrel decline in stockpiles.
Crude oil CLQ6, +1.48%  jumped on Thursday 1.2% to $48 a barrel, while BrentLCOU6, +1.39%  added 1.2% to $49.39.
Central bank news: Minutes from the European Central Bank’s June meeting, showed that policy makers warned that a U.K. vote to leave the EU could have significant negative repercussions for eurozone growth. The ECB meeting predated the U.K.’s historic referendum.
No Federal Reserve members are scheduled to speak publicly today.
Movers and shakers: Shares of WhiteWave Foods Co. WWAV, +18.93%  rallied 19% in premarket trade after French dairy giant Danone SA BN, +3.11%  said it plans on buying the organic-foods producer for about $10 billion.
Western Digital Corp. WDC, +6.14%  rose 5.8% after the maker of computer disk drives late Wednesday raised its quarterly earnings outlook.
Shares of SemiLEDS Corp. LEDS, +60.65%  soared 58% ahead of the bell after the LED chips maker late Wednesday said Peter Chiou will buy 577,000 shares of the company’s common stock at $5.00 per share. SemiLEDS shares closed at $3.30 on Wednesday.
In earnings news, PepsiCo Inc. PEP, +1.47%  reported better-than-expected earnings for its second quarter. Shares rose 1.8% ahead of the open.
PriceSmart Inc. PSMT, +1.45%  and WD-40 Co. WDFC, -2.49%  will release earnings after the market closes.
Other markets: Asian markets ended mostly higher following Wednesday’s higher close on Wall Street. However, Japan’s Nikkei 225 index NIK, -0.67%  ended down 0.7% as the yen remained stubbornly high.
European markets SXXP, +1.31%  rose across the board, taking a breather after three days of Brexit-related losses.
Gold GCQ6, -0.47%  dropped, while the dollar DXY, -0.16%  fell against most other major currencies.