Morning Update

Flat Start as Private Sector Jobs Losses Continue to Mount

Stocks are near the unchanged mark after weakening in early action following a larger-than-expected drop in the ADP's employment change report. Treasuries are mixed on the heels of the jobs data, which kicked off a string of key employment releases, ending with the labor report on Friday, and ahead of the afternoon release of the Federal Reserve's Beige Book. Equity news continues to be sparse, with General Motors announcing it has let go of CEO Fritz Henderson, and McDonald's Corp. reporting that its President and COO stepped down for health reasons. Overseas, Asia added to yesterday's strong advance, while Europe is modestly lower as gains in materials are being offset by losses in the financial sector.

As of 8:49 a.m. ET, the December S&P 500 Index Globex future is at fair value, the DJIA is 2 points below fair value, while the Nasdaq 100 Index is 5 points above fair value. Crude oil is lower by $0.57 at $77.80 per barrel, and the Bloomberg gold spot price is up $12.00 at $1,208.60 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.1% at 74.41.

Former Dow member and largest US automaker General Motors announced that it has fired CEO Fritz Henderson, as a spokesperson from the company, which recently emerged from bankruptcy, said, "The board decided-and Fritz agreed-that given where we are, it was time to make some changes." Chairman Ed Whitacre will become interim CEO as the company searches for a replacement.

Meanwhile, Dow component McDonald's Corp. (MCD $64) also announced that a key executive is leaving the firm, as the world's largest fast-food chain reported that its President and Chief Operating Officer Ralph Alvarez has decided to retire due to health reasons.

Private sector jobs fall more than anticipated, key Fed release looms

ADP reported that private sector jobs fell 169,000 in November, more than the Bloomberg estimate of a loss of 150,000 jobs, but October's 203,000 decline was favorably revised to a 195,000 decrease. The ADP report is the first read on employment conditions this week, which will culminate with the labor report from the Bureau of Labor Statistics, which is scheduled for release on Friday and expected to show 123,000 jobs were shed from nonfarm payrolls in November, and the unemployment rate to remain at 10.2%. However, the ADP report has not been a reliable gauge of the labor report, although adjustments have been made recently. Weekly initial jobless claims will be the next piece of employment data to precede the labor report, expected to increase by 14,000 to 480,000 tomorrow. Treasuries are mixed following the report.

In other economic news, the US MBA Mortgage Application Index rose 2.1% last week, after the index, which can be quite volatile on a week-to-week basis, fell 4.5% in the previous week. The increase was helped by a 3 basis-point decline in the average 30-year mortgage rate to 4.79% versus the previous week, and increases in both the Refinance and Purchase Indexes of 1.7% and 4.1%, respectively. The average 30-year mortgage rate remains above, but is closing in on the record low of 4.61% that was reached at the end of March.

Later today, the economic calendar will yield the release of the Federal Reserve's Beige Book, at 2:00 p.m. ET. The report-a summary of anecdotal economic data collected from all twelve Federal Reserve District Banks-is a tool the Federal Open Market Committee (FOMC) uses to assess whether any changes in its monetary policy are warranted, which it will discuss at its next meeting in about two weeks on December 16. The report is potentially market moving for this reason, and also because it gives investors a more timely reading of current economic conditions than they can get from most other sources. The last Beige Book, released October 21, showed more signs of improvement in the economy, although the gains appeared somewhat tentative. "Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered," the report showed. Traders will be closely watching today's report for any signs that the trajectory of the economy could have changed since then.

Europe modestly lower as banks come under pressure

After posting sharp gains yesterday on waning concerns about the Dubai debt situation, stocks in Europe are under slight pressure in afternoon action, led by solid declines in the banking sector. Shares of partly-nationalized bank, Royal Bank of Scotland Group (RBS $11), are pacing the decline amid concerns about the impact of "very restrictive" control by the government over bonus payouts on the bank's ability to retain employees. Financials are also under pressure following a report from Credit Suisse where the firm sounded a cautious tone regarding the banking sector. In other equity news across the pond, Nokia(NOK $13) is lower despite the world's largest mobile phone maker saying it expects handset market volumes to increase about 10% in 2010, as it also added that it does not expected to gain market share. On the economic front, the eurozone Producer Price Index rose 0.2% month-over-month in October, compared to the expectation of economists surveyed by Bloomberg, which expected producer prices to be flat for the month. Year-over-year, the eurozone PPI is down 6.7%, versus forecasts of a 6.8% decline in the index.

Asia adds to yesterday's strong advance

Stocks in Asia were mostly higher following yesterday's steep advance as Dubai debt concerns continued to ease and metals and mining firms moved higher as metals prices jumped. Japan's Nikkei 225 Index rose 0.4%, aided by strength in automakers on yesterday's US auto sales data, and as the yen weakened versus the dollar, which helped boost optimism regarding profits of export issues. The yen, which has touched a 14-year high recently, came under pressure after the Nikkei newspaper cited the Japanese Prime Minister as saying the strength in the yen can't be left as it is, ramping up some speculation that the government may be mulling an intervention to stem the momentum of the Japanese currency. The modest gains in Japan follows the steep rally in shares on the news that the Bank of Japan held an emergency monetary policy meeting, where it announced after the close in trading on Monday that it will offer 10 trillion yen ($115 billion) is short term loans to help the economic recovery. In other monetary policy news in the region, Thailand's central bank kept its main interest rate unchanged at a five-year low rate of 1.25%, as expected, and the Stock Exchange of Thailand Index fell 2.3%.

Elsewhere, the strength in metal and mining firms helped Australia's S&P/ASX 200 Index gain 0.9%, and Hong Kong's Hang Seng Index increased 0.8%. Meanwhile, South Korea's Kospi Index and China's Shanghai Composite Index both finished over 1% higher, while India's BSE Sensex 30 Index declined 0.2%.