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Monsanto and private payrolls — What you need to know in markets on Thursday

Myles Udland
Markets Reporter

The stock market continues its strong start to 2018.

Markets rallied again on Wednesday with tech stocks leading the way as each of the major averages hit new record highs.

On Thursday, investors will get two pieces of labor market data to break down with the latest reading on private payroll growth from data-provider ADP and the weekly report on initial jobless claims both expected in the morning.

These data come just a day before Friday’s big jobs report for December.

The earnings calendar will also be more busy on Thursday with Monsanto (MON) and Walgreens Boots Alliance (WBA) expected to report results.

Monsanto earnings will be a highlight in markets on Thursday. REUTERS/Brendan McDermid

Wednesday’s rally in stocks also came amid another chaotic day in Washington, D.C. as excerpts of upcoming book attributed several inflammatory statements to former White House strategist Steve Bannon. This resulted in President Donald Trump releasing a statement which said, among other things, that Bannon has “lost his mind” since leaving the administration. Markets did not react.

Auto sales for December were also a highlight on Wednesday, with results showing that year-on-year sales fell in 2017 for the first time since the financial crisis. With 2016 marking a record year for the auto industry, however, 2017’s slowdown still made for the fourth-best year of sales in the industry’s history. And with sales of higher-margin vehicles like SUVs and pickup trucks still strong while the economy and labor market remain in good shape, it’s still a good time to be in the car-selling business.

Manufacturing booms

Manufacturing activity in the U.S. is on a tear.

On Wednesday, the Institute for Supply Management released its latest purchasing managers index, or PMI report, which came in at a better-than-expected reading of 59.7. Wall Street economists had been expected a reading of 58.2. Any reading over 50 indicates expansion in the sector.

The report showed that of 18 manufacturing industries tracked in December, 16 reported growth. Only wood products and textile mills reported a decline in activity.

And the commentary from executives across industries was positive across the board. An executive in the machinery sector said they were seeing strong sales in Europe and Australia against the last two years, with U.S. sales continuing to grow. A transportation equipment executive said, “domestic and international sales on the rise.”

In the paper products industry, one executive noted the tight labor market saying that “all supplier are reporting strong business activity and difficulties obtaining qualified employees.”

Capital Economics notes that this reading is close to a 13-year high and near a level that “historically has been consistent with GDP growth accelerating to more than 4% in annual terms.”

Ian Shepherdson at Pantheon Macroeconomics said that, “the manufacturing upswing continues, with no near-term clouds visible.”

So while the economic story was good for most all of 2017, the year finished perhaps near its peak and a dominating theme of 2018 is sure to be obvious and undeniable strength of the U.S. and global economy. Which will inevitably lead to questions and discussion about how and when and why that might change.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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