Equity futures are trading lower this morning and interest rates are flat ahead of key employment and services data.

“Despite yesterday’s slip, the S&P 500 has quietly staged a near-10% rally from the closing low set on July 2nd,” said economists at BMO, who noted the index has reclaimed the 50- and 200-day moving averages in the process. 

Ninety minutes before the bell, Dow futures are down 20 points to 10,574 and S&P 500 futures are 3.50 points lower at 1,114.75. The 10-year Treasury note is +0-03 at 105-02 yielding 2.898% (-1.1bps). The 2s/10s curve is 2bps flatter at 235bps. The September delivery FNCL 4.0 is +0-01 at 102-00 and the secondary market current coupon is less than 1bp lower at 3.679%. Current coupon yield spreads are 1bp wider vs. 5pm "going out" marks.

Yesterday, the US dollar tumbled against major currencies as investors bet that the Federal Reserve will continue its quantitative easing program to speed the recovery, according to the Financial Times. The dollar was near a 15-year low against the yen. Japanese Finance Minister Yoshihiko Noda said the currency moves have been “a bit one-sided,” adding that “disorderly and excessive currency movements are undesirable and can have a negative impact on the stability of the economy and finance.”

Key Events Today:

7:00 ― The MBA Mortgage Applications Index, just released, rose 1.3% for the final week of July. Applications for purchase rose for the third straight week, yet remain near the lowest level in about 13 years.

“Mortgage purchase applications appear to be stabilizing, but at an extremely low level,” said economists at Nomura Global Economics before the release. “If they fail to turn higher over the next 3-4 weeks, this would suggest downside risks to the near-term outlook for home sales.”

8:15 ― The ADP Private Employment Report last month forecast an increase of 40,000 private jobs, whereas the “official” figures from the Bureau of Labor Statistics reported that 90,000 such jobs were created. Private jobs have risen by an average of 119,000 each month for the past three months.

Economists at Nomura Global Economics expect trends in July to be broadly similar.

“Based on our forecast for a 85,000 increase in the official BLS count of private nonfarm payroll employment, we expect a gain of 20,000 in ADP private employment,” they said. “This assumes a gap slightly smaller than the average over the last six months.”

10:00 ― Like its cousin manufacturing index, the ISM Non-Manufacturing Index, a nationwide measure of the financial, construction, and services sectors, is expected to continue in growth mode in July but slow down from June. Economists forecast a 53.0 score, 0.8 points below June’s level 2.4 points down from May. As the score approaches the break-even 50 level, talk of a double-dip recession is likely to increase. Last month’s level was the lowest since February.

Breaking it down by sector, economists at IHS Global Insight expect mixed results.

“The employment index picked up slightly, but transportation services and freight volumes appear to have slowed down a notch,” they wrote. “Tourism activity is reported to be solid, despite the Gulf oil spill and weak consumer confidence numbers. Financial markets, in general, saw a better month as euro crisis fears subsided and equities rebounded.”

Meanwhile, economists at Nomura expect the survey to rise to 54.0, “bucking the weakening trend” in other surveys.

“Although the manufacturing sector has begun to cool, the recent Beige Book indicated an ongoing improvement in service-related industries,” they wrote. “The index has also lagged to recovery to date, so may have further room to catch up. Particularly interesting in this report will be the employment component, which dipped back below 50 in June. A further deterioration from these levels would be a worrying sign for the job market outlook.”