The S&P 500 closed at a fresh record high after an afternoon boost pushed stocks solidly into the green as traders shook off weak private employment data earlier in the day. A big jobs report now looms over the market, with traders wanting a figure Friday that bolsters rate cut chances without causing a scare about a recession.
The broad market S&P 500 finished up 0.83% at 6,502.08, while the Nasdaq Composite settled up 0.98% at 21,707.69. The Dow Jones Industrial Average finished up 350.06 points, or 0.77%, at 45,621.29.
The ADP private payrolls report showed an increase of 54,000 in August. Economists polled by Dow Jones had expected private employers to add 75,000 jobs. The figure is also less than the revised 106,000 in July.
Equities marched higher, however, as investors reasoned that the recent ADP data was weak enough for the Federal Reserve to justify a September rate cut, but not soft enough to herald a recession. Traders increased their bets that the central bank would cut on Sept. 17, with fed funds futures trading showing an uptick following ADP's report, per CME Group's FedWatch tool. They said there's a 97% chance the rate will move lower.
"The Federal Reserve's free pass on the labor market has ended," said Jamie Cox, managing partner at Harris Financial Group. "ADP data continue to reinforce the narrative that the rate of positive change in the labor market has slowed significantly, so you can expect the Fed to tilt it's balance of risks to cut rates in September."
U.S. Treasury yields dropped in the wake of the ADP data, easing pressure on the market. Gains have been held in check by rising yields earlier in the week, as the the 30-year yield briefly topped 5% Wednesday, amid heightened uncertainty around President Donald Trump's tariffs as well as threats to the Fed's independence.
Also on Thursday, jobless claims for the week ended Aug. 30 increased to 237,000. That number came in above estimates and marked an 8,000 gain from the prior week, providing more evidence of slowing in the labor market. However, the ISM non-manufacturing PMI posted a better-than-expected reading for August, suggesting there is still growth in the services sector.
Source: CNBC
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