March 3 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at participants were served a veritable data gumbo on Thursday, spiced up with Omicron volatility and thickened by a belligerently tight labor market.

All of which provide a patchwork prelude to tomorrow's hotly-anticipated jobs report.

The number of U.S. workers filing first-time applications for unemployment benefits (USJOB=ECI) dropped more than expected last week to 215,000. read more

The reading falls near the low end of the range considered indicative of healthy labor market churn, and likely reflects increased reluctance on the part of employers to hand out pink slips amid a worker drought.

"Claims are headed back to the pre-Omicron lows," writes Ian Shepherdson, chief economist at Pantheon Macroeconomics. "Demand for discretionary services is rebounding strongly, easing the pressure on businesses hit hard by people’s retreat from social activity when the variant emerged.

But Shepherdson is quick to remind us that last week's jobless claims data falls outside the survey period for the Labor Department's February jobs report expected on Friday.

"These data tell us nothing about tomorrow's payroll report, but the renewed downward trend augurs well for March," he says.

Ongoing claims (USJOBN=ECI), reported on a one-week lag, essentially held steady at 1.476 million, well below the ~1.7 million pre-pandemic level.

Further reflecting the tight labor market, layoffs announced by American companies (USCHAL=ECI) dropped by 20% in February to 15,245, while at the same time unveiling plans to hire 215,127 workers, the highest February total on record, according to executive outplacement firm Challenger, Gray & Christmas (CGC).

Two months into 2022, year-to-date planned layoffs are down a whopping 89%.

"The latest numbers give more evidence that job creation is strong, and employers continue to hold fast to their workforces," writes Andrew Challenger, senior vice president at CGC. The rising quit rate is "forcing companies to offer better pay and benefits and more flexibility," Challenger adds.

"The issue for employers at the moment is finding and keeping staff."

So far this year, the sectors seeing the most job cuts are healthcare, government and warehousing. Vaccine refuseniks accounted for over one fifth of the layoffs in the first two months of 2022.

Expanding, Shepherdson said a "rebound in discretionary services" activity in the services sector unexpectedly decelerated last month, with employment dipping into contraction territory.

Providing the day's most disappointing data, Institute for Supply Management's (ISM) non-manufacturing purchasing managers' index (PMI) (USNPMI=ECI) delivered a reading of 56.5, a 3.4 point slide in defiance of the 1.1 point gain forecast by economists. read more

New orders and business activity declined, while the worrisome prices paid subindex rose to 83.1, suggesting that input costs - and by association, inflation - have yet to reach the summit.

While outpointing that the index has registered expansion in all but two of the last 145 months, Anthony Nieves, chair of ISM's Services Business Surveys Committee, explains February's slowdown:

"Respondents continue to be impacted by supply chain disruptions, capacity constraints, inflation, logistical challenges and labor shortages," Nieves writes. "These conditions have affected the ability of panelists’ businesses to meet demand, leading to a cooling in business activity and economic growth."

Remarks from the survey's respondents are littered with phrases such as "supply chain challenges continue," and "staffing shortages" and "price increases with no notice," supporting Nieves' conclusions.

Global financial information firm IHS Markit also offered its take on services PMI (USMPSF=ECI), which fell into rare lockstep with ISM, delivering 56.5 print.

ISM and Markit PMI indexes differ in the weight they allocated to their components, such as new orders, employment, etc.

The graphic below illustrates the disparity between the dueling PMIs:

Next, factory orders (USFORD=ECI) jumped by 1.4% in January, double both the consensus estimate and December's upwardly revised increase. read more

New orders of core capital goods - which excludes aircraft and defense items and is considered a barometer of business expenditure intentions, was revised higher by the Commerce Department to 1%.

The graphic below charts factory orders against ISM's manufacturing PMI, which posted February results on Tuesday:

Finally, in more ancient news, the Commerce Department revised its fourth quarter labor costs (USLCA=ECI) and productivity (USPROR=ECI) data.

The labor costs were bumped up to 0.9% from 0.3%, while the productivity revision came in at 6.6%, just a hair lower than originally reported.

"Unit labor costs were revised up modestly but remained quite tame at the end of last year as productivity acted as a buffer against rising compensation," says Lydia Boussour, Lead U.S. economist at Oxford Economics. "Productivity data continue to be heavily influenced by the pandemic but ... continued strong investment in technology, greater business dynamism, faster technology adoption, and lasting remote work will power above-trend productivity growth in the post-Covid era."

Wall Street seesawed in morning trading, but the S&P 500 (.SPX) is now in negative territory. Chips (.SOX) and consumer discretionary (.SPLRCD) are among the session's biggest losers.

Defensive groups are outperforming, and value (.IVX) is being favored over growth (.IGX).

U.S. STOCKS MIXED AND MODEST IN EARLY TRADE (1012 EST/1512 GMT)

U.S. stock indexes are mixed with just modest changes early on Thursday, after Federal Reserve Chair Jerome Powell pointed to a cautious tightening on Wednesday amid the Ukraine crisis , and ahead of Friday's release of February jobs data. read more

Indeed, a "wait and see" mindset appears to have suddenly gripped markets as investors search for the next catalyst.

With this, defensive groups including utilities (.SPLRCU) and staples (.SPLRCS) are among the stronger sectors.

Under the surface, transports (.DJT) are among outperformers, while chips (.SOX) and small caps (.RUT) are on the weaker side.

Here is where markets stand in early trade:

NASDAQ COMPOSITE: CAN IT RISE TO THE CHALLENGE? (0900 EST/1400 GMT)

A number of measures of the Nasdaq Composite's (.IXIC) internal condition continue to show improvement. That said, there is still work to do to add confidence in a more enduring upside turn.

The Nasdaq New High/New Low (NH/NL) index ticked higher for a fourth-straight day on Wednesday, ending at 14.6%. This put it right on its descending 10-day moving average (DMA), though still shy of its 22.2% February 11 reaction high. read more

Another measure, the Nasdaq daily Advance/Decline (A/D) line also ticked up on Wednesday:

In the wake of a severe nine-month divergence, the A/D line had already, once again, broken below its 30-DMA as the Composite was peaking in November 2021.

Since then, the 30-DMA has been capping A/D line strength, leading to new lows. And in a testament to the recent broad Nasdaq weakness, on February 23, the A/D line hit its lowest level since early 2016.

However, with its improvement since February 23, the A/D line appears poised to once again to clear the moving average.

Since it broke sharply lower in early January, the Nasdaq Composite itself has also been hindered by its descending 30-DMA, which ended Wednesday at around 13,865.

Traders will be watching to see if the Composite, and the A/D line, can both reclaim their 30-day hurdles. Such a turn may confirm the significance of last week's lows.

FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE: read more

Terence Gabriel is a Reuters market analyst. The views expressed are his own

Source: Reuters

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