Stocks opened slightly lower Thursday as traders grappled with some conflicting signals from economic indicators.
The revision of unit labor costs for Q1 came in at 4.2%, much lower than the 6.3% economists expected. That gives the Fed some breathing room to pause at its June meeting.
The trend of labor inflation is lower, despite quarter-on-quarter noise, Schwab’s Kathy Jones tweeted.
Yields reversed on unit labor costs. The 10-year Treasury yield (US10Y) fell 4 basis points to 3.60%. The 2-year yield fell 1 basis point to 4.38%.
Chances of a Fed pause at the June FOMC meeting rose to nearly 70%. Philly Fed President Patrick Harker said yesterday the FOMC could skip a hike. Harker speaks again this afternoon.
Labor data wasn’t so dovish. Jobless claims remained elevated, although little changed at +232K. ADP’s measure of May private payrolls came in at +278K, well ahead of the forecast of +170K.
“This is the second straight upside surprise from ADP, but it does not necessarily signal a strong official number tomorrow,” Pantheon Macro’s Ian Shepherdson said. “Since ADP introduced new methodology last August, its private payroll estimate has undershot the official numbers by a total of 319K, for reasons which are not clear.”
After the start of trading, the May ISM manufacturing index is out. It’s expected to stay steady in contraction territory at 47.
Among active stocks, C3.ai tumbled after its guidance failed to impress after the huge run-up the stock has seen.