The market pullback continued today, further dampening the NASDAQ’s efforts to reach a new all-time high. However, the major indices, though still in the red, are making a slow crawl to the upside. The initial decline in equities was primarily due to some disappointing jobs numbers from the ADP jobs report; however the nail in the coffin had to be the Energy Information Administration’s (EIA) weekly report on crude inventories. After several weeks of massive crude inventory builds, economists thought they were being conservative in suggesting that inventories would increase by 4.1 million barrels last week. Oh, how wrong they were. Crude inventories showed a build more than double that amount at 10.303 million barrels, resulting in yet again another 80-year high. The major equity indices took a sizable plunge following the release of this report.

Otherwise, there were two major economic releases today that, once again, are pointing to some conflicting signals in the US jobs market. Firstly, the ADP national employment report gave a good indication that Friday’s February payrolls from the Bureau of Labor Statistics (BLS) may fall short of expectations. ADP sees the February jobs market slowing, showing that private payrolls increased 212,000 in the month, which is 8,000 shy of consensus’ estimate. However, ADP’s report includes a huge upward revision for January’s jobs to 250,000 from an initially reported 213,000. We don’t expect today’s numbers to have a profound impact on Friday’s government data estimates. Economists are anticipating that the BLS will note that 225,000 jobs were created in February versus January’s 267,000. When broken out, ADP estimates that service-providing industries will create 181,000 jobs in February versus 206,000 in January, with goods-producing industries up 31,000 versus 45,000 in the month prior. Further detail shows professional services were up 34,000 in February versus January's 49,000 with construction up 31,000 versus 45,000. Growth in the trade & transport sector is at 31,000 jobs, but notably down from 50,000 in January. Financial-related jobs added 20,000 in February which was higher than the 15,000 in January. However, like many of the manufacturing reports indicated, there was substantial weakness in the sector with only 3,000 jobs created versus 15,000 in January.

Next, the Institute for Supply Management (ISM) actually noted a sizable increase in the number of service-producing jobs in February. For the month, ISM’s composite index of the non-manufacturing purchasing managers index (PMI) increased to 56.9 compared to the upwardly revised 56.7 reading in January (from 56.5). The employment component in the services sector is a stand-out positive, jumping nearly 5 points to a 4-month high of 56.4. On the weak end were new orders, where growth was down by nearly 3 points to 56.7 which was the lowest reading since March 2014. Nevertheless, we still note that this is a very healthy and sustainable rate of growth for new orders, which tend to suffer in the winter months anyway. Supplier deliveries slowed further in February which added to the composite for the month, but like the manufacturing index, this is not due to rising demand, but rather companies replenishing inventories that dropped due to port issues on the West Coast and severe winter weather on the East Coast. The slowdown in deliveries is the reason behind a rise in inventories and a build in backlog orders. Pricing pressures, as they are in most reports these days, stayed flat due to low fuel costs. One big positive in today’s report is the broad strength with 14 of the 18 surveyed industries reporting growth for the month. Growth was once again led by the accommodation & food services sector, which is likely getting a boost from discretionary spending due to a stronger jobs market and lower gas prices. In the contractionary column are both construction and mining, which have been weak for some time.