If December’s employment report misses the mark, it wouldn’t surprise some of the sourpusses in the bond market.
Bond traders were pricing in a soft jobs number after Thursday’s ADP payroll data came in at 153,000 private sector payrolls for December, well below the 175,000 expected. ISM nonmanufacturing data also showed weakness in the employment component.
Economists are expecting 178,000 nonfarm payrolls in Friday’s 8:30 a.m. ET government report, according to Thomson Reuters. Other consensus forecasts were higher, including at 185,000.
According to Thomson Reuters, economists also expect a slightly higher unemployment rate at 4.7 percent and average hourly earnings growth of 0.3 percent. That compares with 178,000 jobs in November , and an unemployment rate of 4.6 percent.
As stocks sold off Thursday, bond yields dipped on a surge in buying interest. Prices move inversely to yields. The 10-year yield was at 2.34 percent, the lowest level since Dec. 8 and the 30-year fell to 2.94 percent, a level it has not seen since November.
“I think if anything people were caught short off the Trump trade, and there’s worry tomorrow’s jobs number might not be as firm as hoped,” said John Briggs, head of strategy at RBS.
Stocks closed well off their lows, but the Dow ended down 42 at 19,899 and the S&P 500 fell 1 to 2,269. The Nasdaq however, gained 10 points to 5,487, an all-time high. Amazon.com was a big winner, up 3 percent, as brick-and-mortar retailers continued to get crushed. Macy’s was off 14 percent amid weak sales and massive store closings.
“The Treasury market is pricing in a disappointing [jobs] number, versus the consensus. If we get a 170,000 nonfarm payrolls or higher, that will be a negative for the Treasury market, and we’ll get a relatively quick reversal of this bid,” said Ian Lyngen, head of U. S. rate strategy at BMO.
Lyngen and others said the market is doubting some of the exuberance around President-elect Donald Trump ‘s plans for economic stimulus and tax cuts.
“We have priced in so much optimism in terms of real growth in the new year and what the Trump administration can deliver in terms of fiscal stimulus,” said Lyngen.
Market talk Thursday focused on how it may take longer than some traders expected for Washington to pass stimulus and tax cuts. Lyngen said Fed minutes, released Wednesday, highlighted the fact that central bank officials are uncertain about the impact of Trump’s fiscal package and tax plans. While they mostly expected a positive effect, the outlook is still unclear.
He said that hit the dollar overnight and the sentiment continued to affect trading Thursday. On Thursday, there was also a congressional hearing on cyberspying , and that highlighted the disagreement between Trump and some in Congress over whether U. S. intelligence on Russian hacking is correct.
“The world is coming to the realization that politics in Washington could delay any economic impact from Trumponomics,” said Lyngen.
Stephen Stanley, chief economist at Amherst Pierpont, dismissed the bond market gloom on the employment report. He expects to see 210,000 nonfarm payrolls, helped by hiring by retailers around the holidays. He said there was a lack of retail hiring in October and November reports.
“Wages, after having been down outright in November rebound at 0.3. That would be a big swing in the year-over-year number,” he said. “My guess is it will flip to 2.75 percent year over year. … You are at last seeing a gentle uptrend in wage growth at this point. ”
Scott Redler, partner at T3Live.com, said if there is a weak report, it might ultimately bring in buyers for stocks. A very strong report could make stock investors nervous that the Fed will have to speed up its rate-hiking cycle, while a weaker report would be more neutral for the Fed.
“A light jobs report would bring some weakness in, but I think it will be bought,” he said.
Besides the employment report, there is international trade at 8:30 a.m. and factory orders at 10 a.m.

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Posted 6:15 p.m. today
Updated 6:45 p.m. today
Raleigh, N. C. — An effort revamp North Carolina’s sales tax system to include many services and not just product purchases has created a patchwork of rules and exceptions that is already causing confusion among homeowners and contractors.
The Repair, Maintenance and Installation Service Tax for Real Property went into effect Jan. 1, meaning that contractors must collect an extra 6.75 to 7.5 percent for sales tax, depending on location, for labor costs on repairs to a home, from siding and roof fixes to plumbing and electrical work.
As with most things, however, the devil is in the details:
The state Department of Revenue has issued an even longer list of what qualifies as a repair and is subject to a new service tax, as well as rules regarding real property contracts for services and capital improvements .
“Anytime you deal with tax law it can be confusing,” said Andy Ellen, president of the North Carolina Retail Merchants Association. “I think the General Assembly was trying to simplify it. ”
State lawmakers wrote the law so major remodeling projects that require a building permit are omitted from the service tax.
“If you capitalize an item as a business may do and you capitalize it for income tax purposes, it’s exempt as a capital improvement,” Ellen said. “They were trying to make sure that any changes they made did not disincentivize capital investment so that people would continue to do store remodels and build new homes and do those things that create new jobs and grow the economy. ”
The Revenue Department has been working to educate contractors, who’ve never had to register with the state and charge sales tax for labor.

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Strategists at Citi have pointed to four U. S. stock strategies that break with a crowded consensus.
“There are four points that still seem very much consensus-like yet do not have the kind of solid backup data,” Citi said in a note dated late Wednesday U. S. time. “There’s opportunity in going against the grain.
1. Equity market valuations aren’t actually terribly expensive, Citi said.
Analysts have been citing the Shiller cyclically-adjusted price-to-earnings ratio (CAPE) as indicating stocks are expensive, Citi noted, but it added that while the level was fairly high compared with its history, that may not mean much.
“It is cited regularly by bears, with barely any evidence that it is worth tracking,” Citi said. “The CAPE has extremely low predictive correlation when looking out a year. ”
In fact, the real issue was a plunge in energy industry capital expenditure, it said.
“While the popular narrative of weak business investment has been ongoing for two years at a minimum, the hard numbers indicate that such thinking is simply wrong,” it said. “The oil patch’s pricing issues hammered this one area and it is recovering now. IT budgets, for example, never faltered even as too many investors focused on buybacks which were fairly concentrated. ”
Citi noted that more corporate investment could be on the cards as well, noting a policy proposal to allow first-year 100 percent depreciation write-offs, which could spur spending in 2017 and 2018.
3. Citi isn’t buying into the consensus view that U. S. small caps were likely to outperform large caps.
“The likelihood of even higher bond yields is growing as growth and nascent inflation combine with fiscal stimulus that probably won’t be as revenue neutral as might be suggested. Add in a border tax possibility and everyone flocks to small caps,” Citi said.
But the bank still expected large caps will outperform.
“Higher yields usually mean large caps do better,” it said. “A powerful dollar surge would drive small caps but the greenback already has moved sharply in the past few months and future gains might be much harder to come by. ”
In the wake of Donald Trump’s surprise U. S. election win, the dollar index, which measures the greenback against a basket of currencies, surged to a 14-year high. Larger companies tend to have more overseas earnings, which would be hurt when they are translated back into the greenback.
Trump has since floated the idea of a “border tax” to discourage imports into the U. S. Since larger companies tend to be more likely to import components, equipment or products, tariffs would hurt them more than smaller companies.
“Liking Media stocks generates ‘raspberries’ as the Street remains deeply concerned about cord-cutting and pricing issues,” it said. “However, valuation and earnings revision momentum support the industry group’s relative outperformance potential as might M&A activity. ”
Citi also noted that new technology, such as virtual and augmented reality, could also drive the sector.
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Rebecca Hersher
Former MF Global CEO Jon Corzine arrives on Capitol Hill in 2011.
Susan Walsh/AP
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Former MF Global CEO Jon Corzine arrives on Capitol Hill in 2011.
Former MF Global Chief Executive Jon Corzine will pay a $5 million penalty for his role in the company’s collapse, according to the U. S. Commodity Futures Trading Commission.
MF Global collapsed in 2011, and hundreds of millions of dollars in customer money disappeared, as we reported .
Under the terms of the settlement , Corzine, who has also served as the governor of New Jersey, is barred from commodity trading and cannot use insurance money to pay the penalty. A statement by the CFTC says the amount of customer money the company run by Corzine mishandled is nearly $1 billion.
The former assistant treasurer of MF Global, Edith O’Brien, will pay a $500,000 civil penalty in a separate settlement with the regulatory agency , which was also announced Thursday.
As we reported in 2013 , the approximately 26,000 MF Global customers who lost money in the company’s collapse were expected to recoup their entire investments in a court deal that freed up funds from other parts of MF Global’s parent corporation.
Corzine has apologized to customers for the company’s collapse, saying at a 2011 congressional hearing:
“I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on my mind every day — every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected. ”
The Wall Street Journal reported Corzine “said he accepted responsibility for the company’s failure and is pleased to have reached a settlement. ”
The paper also reported criminal prosecutors had investigated Corzine and other former executives over their role in the company’s bankruptcy, which was the result of billions of dollars of bad bets on European bonds, but they brought no criminal charges.

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Fixed mortgage rates, which have been on a tear since the presidential election, retreated this week, falling for the first time in nine weeks.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 4.2 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.32 percent a week ago and 3.97 percent a year ago.
The 15-year fixed-rate average sank to 3.44 percent with an average 0.5 point. It was 3.55 percent a week ago and 3.26 percent a year ago. The five-year adjustable rate average slipped to 3.33 percent with an average 0.4 point. It was 3.3 percent a week ago and 3.09 percent a year ago.
The retrenchment comes as investors begin to temper their enthusiasm. The post-election climb of home loan rates and selloff in the bond market was attributed to investors’ beliefs that the new administration will spend freely to boost the economy. Now reality is setting in.
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