Trading is predictably cautious ahead of the monthly employment report from the Bureau of Labor Statistics at 8:30AM, but expectations for the report jumped significantly after the ADP report easily beat expectations on Thursday.

Half an hour before the report, the two-year Treasury yield is flat at 0.47%, the 10-year yield is a basis point higher at 3.15%, and the Fannie Mae 4.0 MBS coupon is unchanged at 99-26.

S&P 500 futures are 0.75 points lower at 1,352.25 and the Dow is 12 points lower at 12,669. Both indexes have been steadily rising the past two weeks - the S&P 500 has jumped 5.13% since June 23. 

The ADP report suggested private payrolls jumped by 157,000 in June, versus just 36k in May. Estimates for the BLS report promptly jumped as a result; the consensus expectation climbed 15k to 125,000, with some estimates moving up to 175k versus a May payrolls figure of just 54k. 

"Our guess is that the 'whisper' estimate for private payrolls ... is somewhere in the region of 150,000 to 175,000 after [the ADP report]," said RDQ Economics.

"In the wake of yesterday's stronger-than-expected ADP result, we doubled our job creation call to 130k from 65k," said economists at BMO Capital Markets. "Additionally, the employment components of both ISM surveys showed slight but unexpected gains. With public payrolls still contracting -we estimate by 20k last month - private payrolls probably rose 150k in June."

The six-month average of payrolls growth is 179,000. The unemployment rate is still expected to hold steady at 9.1%.

Earlier in the week, economists at Janney Capital Markets note that population growth adds about 75k - 90k new employees onto the markets in an average month, so "May's job growth was actually negative in 'real' terms."

"That deeply disappointing result marked the transition of economic dead leaves from a likely transitory issue to a potentially longer-lived one and heralded a sharp widening in credit spreads and selloff in the equities sector," they said, suggesting June's numbers thus take on added significance.

Other Key Events Today:

10:00 - Inventory growth in the Wholesale Trade report is expected to continue expanding, but at a slower pace than May's 0.8% advance. Over the prior 12 months, inventories jumped 13.8%.

"Inventories tend to show weakness when commodity prices are declining and that does present some downside risks to wholesale inventories in May and June," said economists at Nomura Global Economics.

3:00 - Consumer Credit is expected to continue growing for the eighth consecutive month in May. The consensus forecast looks for a $4 billion expansion, versus an average of $4.8 billion over the past seven months. The April report showed expansion of $6.3 billion, but as with previous reports the improvement was lopsided with installment lending from the federal government - mostly through student loans - playing a large role.

"Why are we not seeing a more rapid expansion of consumer credit?" asked economists at IHS Global Insight last month. "The answer lies in the main drivers behind consumer spending. With the housing sector bouncing along the bottom and employment making relatively slow progress, both household wealth and incomes remain depressed. As such, consumers continue to closely monitor their spending, and avoid unnecessary purchases."