Stocks Retreat As Strong Job Growth Raises Fears Of Fed Tapering

The U.S. has just released ADP Employment Change report for May which indicated that private businesses added 978,000 jobs in May compared to analyst consensus of 650,000.

Before the release of the report, some analysts were worried that high unemployment benefits would negatively impact job growth as workers would prefer to stay at home to get benefits. However, the report indicated that job growth was much stronger than expected.

It remains to be seen whether better-than-expected ADP Employment Change report will serve as a positive catalyst for the market as traders are mostly interested in the continuation of Fed’s unprecedented support rather than strong economic numbers.

In fact, strong job growth may serve as a bearish catalyst for stocks as healthy job market may push Fed to discuss the reduction of the pace of its asset purchase program.

Initial Jobless Claims Decline To 385,000
The U.S. has also released Initial Jobless Claims and Continuing Jobless Claims reports.

Initial Jobless Claims report indicated that 385,000 Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims would total 390,000 so the report was a bit better than analyst consensus.

Meanwhile, Continuing Jobless Claims increased from 3.6 million (revised from 3.64 million) to 3.77 million.

Soon after the market open, traders will have a chance to take a look at the final reading of Services PMI report for May. Analysts expect that Services PMI increased from 64.7 in April to 70.1 in May.

Treasury Yields Remain Stuck In A Tight Range
Interestingly, the bond market has completely ignored inflation worries in recent trading sessions. The yield of 10-year Treasuries is currently stuck between the 50 EMA at 1.58% and the 20 EMA at 1.61%.

Higher yields may put some pressure on tech stocks, but it remains to be seen whether bond traders will focus on inflation risks in the upcoming trading sessions.

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