Morning Report: ADP predicting a strong jobs report on Friday 1/6/16

Markets are getting slammed as China revalued the yuan at a weaker level than expected. Bonds and MBS are up on the flight to safety trade.

Mortgage Applications fell 11.6% last week as purchases fell 11% and refis fell 12%.

The ADP Employment Change came in at 257k, much better than the 198k Street expectation. Note Friday’s jobs report is forecasting an increase of 200k.

The ISM Non-Manufacturing Index fell to 55.3 from 55.9 last month.

Factory Orders fell 0.2% in November, while durable goods orders were flat. Capital Goods orders (a proxy for business capital expenditures) fell 0.3%.

Fed Vice Chairman Stanley Fischer says that 4 rate hikes this year is “in the ballpark” of what to expect. Note the FOMC minutes are scheduled to be released at 2:00 pm EST today.

Banks are taking down their estimates of Q3 GDP based on the lousy ISM data. Deutsche Bank took down Q4 to 0.5% from 1.5%. The Atlanta Fed took it down to 0.7% from 1.3%.

While inventories and exports are pushing down the GDP data, consumption seems to be turning around. 2015 was the best year for vehicle sales in the US since 2000. While some of that undoubtedly has to do with easy financing (some calling autos the new subprime) most was due to a replacement cycle that was long overdue.

Speaking of autos, GM is inventing in Lyft, the competitor to Uber. This is to have a foothold in the future of summonable driverless cars.

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