Mid-Day Recap: Markets Begin Q3 Cautiously Optimistic

Markets were optimistic before the opening bell, and despite poor omens for the June employment report, positive data in real estate and manufacturing has helped stocks trade higher in the early hours.

Two hours into the first session of the third quarter, the Nasdaq is leading the climb with a 1.28% advance to 1858, followed by a 1.25% gain in the Dow to 8552, and the S&P 500 is close behind with a 1.08% advance to 929.

Data was pretty mixed this morning, beginning with the ADP Employment Survey, which suggested that 473,000 private jobs were lost in June, more than 100k worse than the median forecast.

Despite the poor figures, Joel Prakken, chairman of Macroeconomic Advisors and spokesman for the ADP, called the report “a notable improvement over the first three months of the year.” In the first quarter ADP job losses averaged 691,000, whereas in Q2 they averaged 473,000, he said.

Investors shrugged off the report, but if the official statistics to be released tomorrow tell the same story today’s gains could be quickly erased. 

Mixed data at 10:00 initially caused markets to fall but a few minutes later they recovered.  

The Pending Home Sales Index improved yet again, jumping 6.7% in the month and putting the annual gain at 3.2%. The National Association of Realtors said affordability conditions was unleashing pent up demand and the first-time buyer tax credit was adding increased incentives to potential homebuyers.

“The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline,” said NAR’s Lawrence Yun.

The supply side of the real estate market is evidently less healthy than the demand front though: Construction Spending dropped by 0.9% in May, pushing the index to its lowest level in more than half a decade. 

Deutsche Bank’s Joseph LaVorgna said spending could quickly improve in the second half of the year as the stimulus package takes effect and the market rebounds from hitting the bottom. 

Meanwhile, the ISM Manufacturing index failed to grow in June but conditions improved in line with expectations. The index moved up 2 points to 44.8, with seven of the 18 industries surveyed reporting growth.

The Production component broke into growth mode at 52.5, but New Orders dropped back into contraction, and Employment â€