Stocks End Lower, Earnings And Jobs In Focus  Image: Bigstock Stocks closed lower yesterday with all of the major indexes down roughly -1% or more. The news stories point to Fitch Ratings' downgrade of the United States' long-term foreign currency issuer default rating from AAA to AA+. But I think the pullback was more about yesterday's stronger than expected ADP Employment Report, and what that could mean for Friday's official Employment Situation Report, and ultimately interest rates. Yesterday's ADP report showed private payrolls increased by 324,000 vs. the consensus for 185,000. That's 75% larger than had expected. And an exceptionally strong employment report could signal that the economy is still too hot for inflation to get down to the Fed's 2% target, and that more rate hikes could be needed. It should be noted that the ADP report has a spotty track record at foreshadowing what the Employment Situation Report (by the Bureau of Labor Statistics), will say. But sometimes they get it right. And an overly strong report could suggest more rate hikes to come. So I pin yesterday's pullback more of the hot ADP jobs report than the rating downgrade. That, and some simple profit taking given the amazing year we've had so far. But if we are lucky enough to get an even bigger pullback, I think we'll see plenty of investors buying the dip. Yes, I said lucky. Dips are never fun when they are happening. But if you believe the dip will be relatively shallow and short-lived, and think the market still has more upside to go, then a dip would be a welcomed sight. And should be looked at as an opportunity thru that lens. Especially since many people did not get a chance to take full advantage of this year's rally the way they wished they could have. And any chance to get more at a cheaper price could be a great opportunity. In other news, yesterday's Motor Vehicle Sales came in at 15.7 million units (annualized) vs. the consensus for 15.6M. And MBA Mortgage Applications fell -3.0% w/w with purchases off -3.2%, and refi's -2.5%. Today we'll get Weekly Jobless Claims, the Challenger Job-Cut Report, the Productivity and Costs report, Factory Orders, the PMI Composite report, and the ISM Services Index. And we'll get more earnings with another 631 companies on deck, including mega-caps Apple and Amazon reporting after the close. All eyes will be on today's earnings reports from Apple and Amazon, given that they are two of the most widely held stocks by investors. But the main event this week will most definitely be the Employment Situation Report on Friday. Until then, we've got a whole day of trading to get thru first. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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