U.S. stocks open higher after ADP data shows fewer-than-expected jobs created in September


U.S. stock indexes opened slightly higher on Wednesday, helped by weak labor market data, after a sharp sell-off that wiped away the Dow Jones Industrial Average’s 2023 gains as Treasury yields jumped to fresh 16-year highs in the previous session.

How are stock indexes trading

  • The S&P 500 index
    SPX
    rose 10 points, or 0.3%, to 4,240

  • The Dow Jones Industrial Average
    DJIA
    added 3 points, leaving it nearly flat, at 33,007

  • The Nasdaq Composite
    COMP
    gained 79 points, or 0.6%, to 13,138

On Tuesday, the Dow industrials fell 431 points, or 1.29%, to 33,002, posting its biggest daily percentage drop since the March banking crisis and its lowest closing level since May 31, according to Dow Jones Market Data. The S&P 500 declined by 1.4%, to 4,229, while the Nasdaq dropped 1.9%.

What’s driving markets

U.S. stock indexes opened slightly higher on Wednesday as Treasury yields retreated after payroll processor ADP said U.S. private-sector employment rose by a tepid 89,000 in September. That was the smallest increase in two and a half years. Economists polled by the Wall Street Journal had forecast a gain of 150,000.

See: ADP says only 89,000 private jobs were created in September. That’s way below forecast.

Jeffrey J. Roach, chief economist at LPL Financial, said investors should treat the ADP report with caution as it does not include government workers and is not a “consistent indicator” of the official employment report that follows a few days later.

“That said, momentum within the labor market is slowing across the board in both goods-producing and services-producing businesses,” Roach said in emailed commentary on Wednesday.

“The labor market is cooling and is taking pressure off the Fed concerned with the risk of a second wave of inflation. Businesses should get some respite as inflation decelerates and the labor market comes into balance,” he added.

See: Rising Treasury yields are upsetting financial markets. Here’s why.

U.S. bond yields eased lower on Wednesday after hitting fresh 16-year highs in the previous session. The yield on the 2-year Treasury 
BX:TMUBMUSD02Y
slipped by 6 basis points to 5.084%, while the yield on the 10-year Treasury
BX:TMUBMUSD10Y
 dropped 5 basis points to 4.749%.

The choppiness came after the S&P 500 shed 1.4% on Tuesday to close at its lowest level since the start of June as investors balked at the sight of benchmark borrowing costs hitting fresh 16-year highs in a reflection of concerns that a sturdy U.S. economy will cause the Federal Reserve to keep interest rates higher for longer.

The trend is being felt globally, with benchmark German bund yields
BX:TMBMKDE-10Y
and U.K. gilts
BX:TMBMKGB-10Y
hitting multi-year highs, too, while the DAX equity index
DX:DAX
in Frankfurt trades at its lowest since March.

“We’re at risk of repeating ourselves on a daily basis now, but the last 24 hours saw the relentless bond sell-off continue, with yields rising to fresh multi-year highs on both sides of the Atlantic,” said Jim Reid, strategist at Deutsche Bank.

“I struggle to see how the recent yield moves don’t increase the risk of an accident somewhere in the financial system given the relatively abrupt end over recent quarters of a near decade and a half where the authorities did everything they could to control yields,” Reid added.

U.S. economic updates set for release on Wednesday also include the final reading of the S&P services PMI for September at 9:45 a.m. ET, as well as the August factory orders and the September ISM services report, both at 10 a.m.

There will also be more chatter from Federal Reserve officials. Fed Governor Michelle Bowman is due to speak at a banking conference at 10:25 a.m., and Chicago Fed President Austan Goolsbee will give welcoming remarks at banking symposium, starting at 10:30 a.m.

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