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ADP said 187k private sector jobs were added in Jan, above expectations of 140k but Dec was revised down by 50k from the outlier report originally given of 297k. The service sector, the biggest % of the labor market, continued to drive most of the gains with a 166k job increase led by small and medium sized companies. The goods producing sector added 21k jobs led by a 19k person increase in manufacturing. Construction jobs fell by 1k while the financial services area added 3k jobs. Bottom line, even with the Dec downward revision, the two month average is a solid 217k and certainly a positive for economic activity. There was nothing in the press release alluding to the bad weather being a factor in hiring. From a market perspective however, Friday’s payroll figure always is more relevant and expectations are for a total non farm gain of 143k.

The debt of Italy, Spain, Portugal, Greece and Ireland continue to rally as buyers anticipate an imminent announcement from the EU on what the next step will be in their attempt to contain high bond yields that each country faces. Spanish yields in particular are falling to 3 month lows. S&P did downgrade the credit of Ireland one notch to A- but still have them 1 notch above Moody’s and Fitch. Short rates continue to rise in Germany and the UK (highest since ’09) as pressure mounts on both the ECB and BoE in dealing with rising inflation pressures. Euro Zone PPI rose 5.3% y/o/y, the highest since Oct ’08 and UK construction spending was better than expected sending the pound to a 3 month high vs the US$. In the US, the MBA said refi’s rose 11.7% from last week’s 1 yr low and purchases were up 9.5% from a 3 month low. ABC confidence rose 3 pts to -41 and compares favorably with the one yr avg of -45. II: Bulls 52.7 v 55.1 Bears 22 v 19.1

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