Private Sector Jobs Data May Contribute To Strength On Wall Street

The major U.S. index futures are currently pointing to a modestly higher open on Wednesday, with stocks poised to extend the upward move seen over the three previous sessions.

The futures moved higher following the release of a report from payroll processor ADP showing a notable slowdown in the pace of private sector job growth in the month of August.

ADP said private sector employment climbed by 177,000 jobs in August after surging by an upwardly revised 371,000 jobs in July.

Economists had expected private sector employment to advance by 195,000 jobs compared to the jump of 324,000 jobs originally reported for the previous month.

The slightly smaller than expected increase in private sector employment may add to recent optimism about the outlook for interest rates.

Stocks moved sharply higher during trading on Tuesday, extending the upward move seen over the two previous sessions. The major averages all moved to the upside, with the tech-heavy Nasdaq posting a standout gain.

The major averages finished the session just off their best levels of the day. The Nasdaq surged 238.63 points or 1.7 percent to 13,943.76, the S&P 500 jumped 64.32 points or 1.5 percent to 4,497.63 and the Dow advanced 292.69 points or 0.9 percent to 34,852.67.

The strength on Wall Street came as the latest batch of U.S. economic data helped ease recent concerns about the outlook for interest rates.

Consumer confidence in the U.S. deteriorated by much more than anticipated in the month of August, according to a report released by the Conference Board.

The Conference Board said its consumer confidence index tumbled to 106.1 in August from a downwardly revised 114.0 in July.

Economists had expected the consumer confidence index to edge down to 116.5 from the 117.0 originally reported for the previous month.

A separate report released by the Labor Department showed job openings in the U.S. decreased to 8.8 million on the last business day of July.

“From the Fed’s perspective, the week is off to a promising start with the JOLTS job opening report much softer than expected, alongside downward revisions to the previous month,” said Craig Erlam, senior market analyst at OANDA.

He added, “The Fed needs to see a softer labor market to be confident that price pressures aren’t just abating but substantially and sustainably and this report is a move in the right direction.”

Telecom stocks saw significant strength on the day, resulting in a 3.0 percent surge by the NYSE Arca North American Telecom Index.

AT&T (T) and Verizon (VZ) posted notable gains after Citi upgraded their ratings on both telecom giants to Buy.

Considerable strength was also visible among semiconductor stocks, as reflected by the 2.6 percent jump by the Philadelphia Semiconductor Index.

Airline, steel and housing stocks also saw notable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are rising $0.46 to $81.62 a barrel after jumping $1.06 to $81.16 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,970.70, up $5.60 compared to the previous session’s close of $1,965.10. On Tuesday, gold climbed $18.30.

On the currency front, the U.S. dollar is trading at 146.03 yen compared to the 145.88 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0911 compared to yesterday’s $1.0880.

Asia

Asian stocks hit two-week highs on Wednesday, while the dollar wobbled as weak U.S. labor market data bolstered bets that the Fed’s rate hike cycle could be nearing the end.

Overnight data showed U.S. job openings dropped to the lowest in nearly two-and-a-half years in July, signaling easing labor market pressures and allowing the Fed room to forgo more rate increases this year.

The CME FedWatch Tool shows that markets are now pricing in an 89 percent chance of the Fed standing pat at its meeting next month and a 50 percent chance of another pause at the November meeting.

U.S. nonfarm payrolls and personal consumption expenditure reports due this week are expected to provide a much clearer economic picture.

Gold held near three-week high in Asian trading, while oil prices climbed on data showing a large U.S. stockpile draw and concerns over the Hurricane Idalia, which crawled towards Florida’s Gulf Coast.

China’s Shanghai Composite Index fluctuated before ending marginally higher at 3,137.14 as investors awaited Thursday’s PMI data for directional cues.

Hong Kong’s Hang Seng Index finished marginally lower at 18,482.86 despite reports that China’s largest banks are preparing to cut interest rates on existing mortgages and deposits.

Japanese shares eked out modest gains after rising U.S. yields pushed the yen to its lowest in almost 10 months.

The Nikkei 225 Index rose 0.3 percent to 32,333.46, extending gains for a third straight session and reaching its highest level since August 10. The broader Topix Index settled 0.4 percent higher at 2,313.38.

Banks and Kyocera topped the gainers list to rise 1-2 percent. Toyota Motor ended up more than 1 percent after an announcement that it would restart operations at its assembly plants in Japan on Wednesday.

Seoul stocks rose for a third consecutive session, with the Kospi rising 0.4 percent to 2,561.22 on hopes for Fed rate pause.

Australian markets rallied to reach a two-week high after data showed Australian consumer price inflation slowed to a 17-month low in July, helping move the discussion toward the prospect of interest-rate cuts.

The benchmark S&P ASX 200 Index jumped 1.2 percent to 7,297.70, while the broader All Ordinaries Index closed 1.2 percent higher at 7,506.80.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index finished marginally lower at 11,521.12 after the release of weak housing data.

Europe

European stocks are turning in a mixed performance on Wednesday after data showed inflation rising in some German states.

Spanish inflation also accelerated and a measure of economic confidence in the euro zone fell again in August, raising worries about the inflation and growth outlook.

While the U.K.’s FTSE 100 Index is up by 0.4 percent, the French CAC 40 Index is down by 0.1 percent and the German DAX Index is down by 0.2 percent.

In corporate news, Orsted has plunged after the Danish renewable energy firm warned of impairments of up to 5 billion Danish crowns ($729.78 million) on its U.S. portfolio.

Delivery Hero shares have also slumped after the German online food delivery service reported net and operating losses for the first half.

On the other hand, British insurer Prudential has moved sharply higher after reporting its first-half operating profit rose 6 percent.

Direct Line Insurance Group has also risen after the motor and home insurer poached Adam Winslow, a senior executive at rival Aviva, to be its new chief executive.

Hi-tech software firm Instem has soared after it agreed to a £203 million takeover by a U.S. private equity firm.

U.S. Economic Reports

Private sector employment in the U.S. increased by slightly less than expected in the month of August, according to a report released by payroll processor ADP on Wednesday.

ADP said private sector employment climbed by 177,000 jobs in August after surging by an upwardly revised 371,000 jobs in July.

Economists had expected private sector employment to advance by 195,000 jobs compared to the jump of 324,000 jobs originally reported for the previous month.

“This month’s numbers are consistent with the pace of job creation before the pandemic,” said ADP chief economist Nela Richardson.

She added, “After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede.”

Revised data released by the Commerce Department on Wednesday showed the U.S. economy grew by less than previously estimated in the second quarter.

The report said the increase in gross domestic product in the second quarter was downwardly revised to 2.1 percent from the previously reported 2.4 percent. Economists had expected the pace of GDP growth to be unrevised.

The slower than previously estimated growth reflected downward revisions to private inventory investment and nonresidential fixed investment.

Upward revisions to state and local government spending, exports, consumer spending, federal government spending, and residential investment helped limit the downside.

At 10 am ET, the National Association of Realtors is scheduled to release its report on pending home sales in the month of July. Pending home sales are expected to decrease by 0.6 percent in July after rising by 0.3 percent in June.

The Energy Information Administration is due to release its report on oil inventories in the week ended August 25th at 10:30 am ET.

Crude oil inventories are expected to decrease by 3.3 million barrels after tumbling by 6.1 million barrels in the previous week.