The markets are receiving some level of reprieve today following a positive initial reading on the employment situation. ADP's estimate for private payroll grew by 241,000 in December versus the consensus estimate for 235,000 and against ADP's upwardly revised 227,000 for November (initial estimate 208,000). Deflation is now quite prevalent in Europe as prices fell by 0.2% in December over last year, which is more than the 0.1% expected. The drop was once again concentrated on gas prices, which declined by 6.3% over last year. The euro managed to hit another 9-year low against the dollar, but European markets rallied anyway. Now, the major equity indices are anticipating comments from the Federal Reserve Open Market Committee (FOMC) which are set to be released at 2:00 PM EST. In the meantime, ADP’s report and the following releases are contributing to the market’s strength.

The U.S. trade balance managed to narrow far more than expected during the month of November, again due to lower oil prices, which means that December’s data should be even lower. For November, the U.S. trade deficit narrowed to -$39.0 billion from a revised -$42.2 billion in October, and expectations were for the deficit to narrow to -$41.5 billion. During the month, exports were down 1.0% after gaining 1.6% in October, but imports declined by 2.2% after increasing by 0.7% in October. The large drop in imports was primarily due to a slowdown in petroleum imports, which were down 11.9% while exports in petroleum products increased 5.9%. However, the goods excluding petroleum gap widened to -$45.7 billion from -$45.2 billion in October, and the services surplus was essentially unchanged at $40.4 billion. These numbers should help to boost fourth quarter US gross domestic product (GDP) growth estimates.

After reporting no data for the past two weeks, the Mortgage Bankers’ Association (MBA) noted that application activity fell sharply by 5.0% for purchase applications and 12.0% for refinancing applications. The purchase applications component is a good indicator for the underlying number of home purchases, and it is clearly negative for the year, coming in on a year-over-year basis at -8.0%. Declines in the level of applications continue despite mortgage rates remaining low. The average 30-year rate decreased slightly to 4.01% in the two-week period.