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Daily Market Commentary

ADP Employment change is out this morning, showing strength as the private sector added 40,000 jobs.  This is a surprise upside to last months 10,000 and much more than the loss of 30,000 that was expected.  Many use the ADP employment report as a precursor to the payrolls number, which will be out Friday.  Bonds were higher before this news, but have sold off on the strength of the number.

Contrarily, the Challenger Jobs cuts report, which quantifies the jobs cuts announced for last month, and compares to a year earlier.  There was a 45% increase in job cut announcements, not surprisingly, mostly coming from the automotive sector. 

Bernanke gave a speech yesterday, indicating that the hawkish Fed will now target the dollar as a means to moderate US inflation.  A weak dollar is inflationary, especially in the US where the balance of trade so heavily favours imports.  What is interesting, is that the Fed's only policy tool to directly affect the dollar is higher interest rates.  We already know the Fed has indicated they are on hold now at 2%, does that mean they are getting hawkish and looking to raise rates?  The Bond market didn't think so.  Bonds rallied strongly after his speech.  Intervention in the currency markets have historically been very short term solutions, so we'd be sceptical if the Fed starts any major US$ buying program. 

NonFarm productivity and Unit labor costs are out this morning, both higher than expected.  These numbers are also having a positive effect on equity futures and sending yields higher as well

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