The ADP jobs report preview showed that private-sector hiring strengthened in September. S&P 500 futures pointed lower as markets weighed the implications for Federal Reserve rate cuts.
ADP has typically been an unreliable predictor of what Friday's jobs report will reveal. However, ADP and Bureau of Labor Statistics data have matched up fairly well the past couple of months.
ADP Employment Report
Payroll processor ADP reported 143,000 new private-sector jobs in September, above 121,500 estimates, according to the Econoday consensus forecast. Predictions ranged between 80,000 and 140,000.
August job growth, initially reported at 99,000, was revised to 103,000.
Ahead of the September data, ADP had reported a slowdown in monthly job growth, from 155,000 in June to 111,000 in July and 99,000 in August.
Fed Rate-Cut Outlook
After the ADP jobs report release, markets are pricing in 33% odds of another half-point rate cut at the Nov. 7 Fed meeting, down from 37% on Tuesday, according to CME Group's FedWatch page.
Markets see 63% odds that Fed rate cuts will add up to 75 basis points at the year's final two meetings, down from 67% prior to ADP.
On Monday, Fed Chairman Jerome Powell highlighted upward revisions to the income gains of U.S. households, which in turn means that households have been saving more than believed. The upshot is that consumer spending seems to be on a healthy footing.
Powell characterized the economy as being in "solid shape," which should allow the Fed to normalize interest rates gradually.
S&P 500
S&P 500 futures slipped 0.3% after the ADP jobs report. On Tuesday, the S&P 500 fell 0.9% amid the intensifying Middle East conflict. However, the S&P 500 closed within 1% of Monday's all-time closing high.
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