Wall Street rebounds as tech giants advance, ASX set to rise
ADP’s monthly report showed private employment increased more than expected in October. The report offers a partial look at the job market, which has weakened overall and raised broader concerns about economic growth.
The services sector, which makes up the largest part of the U.S. economy, expanded more than Wall Street expected in October, according to the Institute for Supply Management. The report shows that while overall business activity is increasing, employment is still shrinking.
“The survey provides a reassuring sign that economic growth continued in October despite the government shutdown,” Bill Adams, chief economist at Comerica Bank, said in a note to investors.
A weaker labor market remains a major concern for the Fed. The central bank cut its benchmark interest rate for the second time at its last meeting this year, partly to help support the economy in a weakening job market. Fed Chairman Jerome Powell and many other Fed officials have expressed concerns about further rate cuts because inflation remains stubbornly high and could be further fueled by lowering interest rates.
The combination of a weak labor market and hot inflation puts the Fed in a difficult position.
“For Fed watchers, this ADP report should make clear that a December rate cut is now on the agenda,” Jamie Cox, managing partner of Harris Financial Group, said in a note to investors. “We’re getting closer to a slowdown in the labor market, and that’s going to get the Fed’s attention.”
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Wall Street softened its expectations for another rate cut in December. Investors currently estimate there is a 65 percent chance the Fed will cut interest rates, according to CME FedWatch. This is lower than the 90 percent chance just before the previous rate cut.
Treasury yields rose in the bond market. The yield on the 10-year Treasury note rose to 4.15 percent from 4.09 percent at the end of Tuesday. The yield on the two-year Treasury note rose to 3.62 percent from 3.58 percent at the end of Tuesday.
European markets gained strength and Asian markets closed mostly lower.
