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U.S. stocks on Wednesday were higher, though moves were small compared to the previous session’s hefty gains. Market participants received another indication of a cooling labor market and a downward revision to Q2 economic growth.
The tech-heavy Nasdaq Composite (COMP.IND) was +0.7% in morning trade. The benchmark S&P 500 (SP500) was +0.5% and the blue-chip Dow (DJI) was +0.4%.
ADP reported August private payrolls up 175K, lower than the 195K expected.
The numbers had little change on rates. Many traders are skeptical of ADP as it has little correlation to official figures.
The 10-year Treasury yield (US10Y) was down 2 basis points to 4.10%. The 2-year yield (US2Y) was down 4 basis points to 4.85%.
The broader market saw its best rally since June on Tuesday, fueled by Fed-friendly weak economic data that sparked megacap gains. June job openings slumped and August consumer confidence also dropped.
“For now the data put an abrupt stop to the growing narrative that the Fed would still deliver another rate hike in the current cycle,” Deutsche Bank’s Jim Reid said.
“One final hike is still possible this year, but the discounted chances for that to happen have slipped from close to 70% to a coin toss,” ING’s rates team said. “Our economist believes the Fed has already reached its peak.”
“Recent data is eroding the narrative of US resilience that had supported the rise of 10Y yields to above 4.3% over the past weeks,” ING added.
Bitcoin (BTC-USD) +5% continued to climb after the Grayscale decision bounce.
Revised Q2 GDP numbers came in. The headline number was revised down to growth of 2.1% from a prior estimate of 2.4% and below the consensus of +2.4%. Meanwhile, core PCE price index for Q2 was also revised down to +3.7% from +3.8% previously.
“Markets tend not to focus on revisions too much, but the personal consumer deflators will likely attract some attention as investors try to understand the logic of the Federal Reserve’s policies (this may be a futile exercise),” UBS’s Paul Donovan said.