Good morning. Here’s what you need to know.
— CVS Caremark will stop selling tobacco products in its pharmacies by October 1. “Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health,” said CVS president and CEO Larry J. Merlo in a statement. “Put simply, the sale of tobacco products is inconsistent with our purpose.”
— The big potential market mover today is the release of payroll processing firm ADP’s monthly National Employment Report — a precursor to Friday’s official BLS jobs report — at 8:15 AM ET. Economists predict the report will estimate that 185,000 workers were hired by private-sector firms in January, down from ADP’s December estimate of 238,000. “Given its recent history of overshooting payrolls, the market reaction to an upside surprise is likely to be somewhat muted,” says Millan Mulraine, deputy head of U.S. research and strategy at TD Securities. “On the other hand, a big downside miss on expectations is likely to result in a strong reaction from the markets, as a weak performance is likely to be interpreted as a signal of downside risks for consensus payrolls expectations.”
— S&P 500 futures point to a slightly negative open while Treasury note futures point to a slightly positive open and gold resumes its upward trajectory. In a repeat of price action in the past few days as global markets have tumbled, the dollar is sliding against the yen. European indices are rising with the exception of the German DAX, which is down marginally. The Japanese Nikkei 225 closed up 1.2% on Wednesday, and the Hong Kong Hang Seng closed down 0.6%.
— Nikos Chrysoloras and Rebecca Christie at Bloomberg News report on discussions surrounding a new financial aid package for Greece. “The next handout to Greece may include extending the maturity on rescue loans to 50 years and cutting the interest rate on some previous aid by 50 basis points, according to two officials with knowledge of discussions being held by European officials,” write Chrysolaras and Christie. “The plan, which will be considered by policy makers by May or June, may also include a loan for a package worth between 13 billion euros ($17.6 billion) and 15 billion euros, another official said.”
— The Institute for Supply Management releases the results of its monthly survey of U.S. services-sector firms at 10 AM ET. Economists predict the report’s Purchasing Managers Index advanced to 53.7 from December’s 53.0 reading, indicating a slight acceleration in the pace of expansion in services industries in January. Follow the data LIVE on Business Insider »
— In the eurozone, Markit’s January services-sector Purchasing Managers Index survey revealed a slight but unexpected deceleration — the PMI fell to 51.6 versus expectations for an unchanged reading at 51.9. Italy’s services PMI rose to 49.4 from 47.9, above expectations for a smaller gain to 48.9. France’s services PMI rose to 48.9 versus expectations for an unchanged reading at 48.6. However, both remain below 50, which means the services sectors in those two countries are still contracting, though at a slower pace than before.
— Eurozone retail sales fell 1.6% from the previous month in December after advancing a downward-revised 0.9% in November. Economists were looking for a 0.7% drop. On a year-over-year basis, sales were down 1.0%, while expectations were for a 1.5% rise. “The ECB meeting tomorrow offers a slight chance of a dovish surprise,” says Marc Chandler, chief currency strategist at Brown Brothers Harriman. “It’s worth noting that the ECB was able yesterday to fully sterilize its bond purchases under the SMP program. It had failed in its previous two operations. Recently, there have been press reports that Draghi was seeking German support for ending the sterilization operations. However, that seems unlikely to happen at this juncture.”
— Dave Lutz, head of ETF trading and strategy at Stifel Nicolaus, relays what traders are talking about this morning: “Seems quiet out there, with traders unwilling to take big bets ahead of ISM services today (representing roughly 80% of our economy) — and ADP, both which will set the tone for NFP Friday. EM remains stable, with the FX basket higher against the $US, and most CDS coming off peaks quick…Stress has come off some of the Treasury bills maturing in March, as signs indicate the House to accept a ‘clean’ bill raising the debt ceiling. The $US is losing ground to both euro and yen — and the bulls are watching the ‘carry trade’ reversing most of yesterday’s gains with the $US-yen cross struggling to stay upside of the 100-day moving average this morning. With the dollar index lower, we have a tailwind for commodities — and we continue to see upticks in some industrial metals like silver and copper, and gold 50 basis points higher as it gears up to test the 100-day moving average again. WTI crude oil is higher, not only from inventory data, but reports of ‘limited’ exports to Europe nearing. Natural Gas is off 1%, as investors take profits after yesterday’s pop higher, and the CME hikes margins again — a second time in a week.”
— JPMorgan is in talks to sell its commodities business, reports Dmitry Zhdannikov at Reuters. “Fast-growing trading house Mercuria, led by two former Goldman Sachs executives, emerged as the front-runner to buy the physical commodities unit of JPMorgan, one of the most powerful oil and metals desks on Wall Street, two sources told Reuters,” writes Zhdannikov.
— Today is a rare “double POMO” day in which the Fed will conduct two open market operations. It plans to buy $US0.85-$1.15 billion of TIPS at 11 AM and $US2.5-3.0 billion of Treasuries at 2:15 PM. This could provide support for markets.