4:19pm: Traders react to ADP data, Treasury yields
The Dow closed Wednesday up 127 points, 0.4%, at 33,130, the Nasdaq Composite added 177 points, 0.4%, to 13,236 and the S&P 500 improved 34 points, 0.8%, to 4,264. The small-cap Russell 2000 index ticked up 1 point to 1,728.
It was an up-and-down trading session, during which the Dow twice sunk into the red, but the industrial average managed to snap a three-day losing streak.
The relief for markets may be short-lived, however, according to Baird investment strategy analyst at Ross Mayfield,
“Anytime you have big momentum in one direction, there’s going to be days where you get a little bit of reprieve and in this case, you get a reprieve in rates and equities," Mayfield said. "The broader trend is really the downside from here."
Investors digested job growth in the US private sector that slowed significantly in September. Private sector employment increased by 89,000 jobs in September, well below forecasts of 160,000.
Meanwhile, the 10-year Treasury yield fell slightly from its 16-year high to 4.729%.
12:00pm: Stocks hold gains after volatile morning
US stocks were in the green at midday after an up-and-down morning as investors digested the latest economic events.
At midday, the Dow Jones Industrial Average was up 75.56 points, 0.2%, at 33,077.94, the S&P 500 up 19.79 points, 0.5%, at 4,249.24 while the Nasdaq Composite was up 121.96 points, 0.9%, at 13,181.43.
Chris Beauchamp at online trading platform IG said "buyers while buyers have made an appearance on Wall Street," but "it’s not much of a bounce in risk appetite."
"With the US yield curve continuing to un-invert recession fears are rising again. The drop in oil prices is another welcome development this afternoon, though there’s a long way to go before fears of resurgent inflation can be put to bed," he said.
Following the ADP payrolls data earlier, there was news that the US service sector saw a subdued end to the third quarter, according to figures from S&P Global and the Institute of Supply Management.
The seasonally adjusted final S&P Global US services purchasing managers' index posted 50.1 in September, down from 50.5 in August and broadly in line with an earlier flash estimate of 50.2.
"The final PMI data for September add to indications that the US economy has started to cool again after a resurgence of growth earlier in the summer," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Figures from the Institute of Supply Management also showed an expansion in the US service sector in September, though at a slower pace than the month prior.
The ISM services PMI registered 53.6 in September, down from 54.5 in August. The pullback in the rate of growth for the services sector was attributed to slower rates of growth in the new orders and employment indexes.
9:40am: Stocks rally after weak ADP report
US stocks recouped some of Tuesday's heavy losses in early trading, although the mood remained cautious ahead of non-farm payrolls on Friday and ongoing political uncertainty.
Shortly after the opening bell, the Dow Jones Industrial Average was up 57.71 points, 0.2%, at 33,060.09, the S&P 500 up 16.97 points, 0.4%, at 4,246.42 and the Nasdaq Composite was up 89.12 points, 0.7%, at 13,148.58.
A report from ADP showed job growth in the US private sector slowed significantly in September, with private sector employment increasing by 89,000 jobs in September, well below forecasts of 160,000.
In August, private sector employment increased by 180,000 jobs, it was upwardly revised from 177,000
"September showed the slowest pace of growth since January 2021, when private employers shed jobs. Large establishments drove the slowdown, losing 83,000 jobs and wiping out gains they made in August," ADP said.
But Ian Shepherdson at Pantheon Macroeconomics is not fan of the report.
"ADP is both an unreliable indicator of the official private payroll numbers and essentially unforecastable, due to the short run of data since major methodological changes in August 2022," he said, noting errors since last August, relative to the initial official private payroll print, have ranged from an undershoot of 337,000 in January to an overshoot of 348,000 in June, with a mean absolute error of 85,000.
Nonetheless, the weaker figures did contribute to the yield on the benchmark 10-year US Treasury falling 0.07 percentage points at 4.73% lower than before their, continuing a reversal from a 16-year high of 4.88%.
The yield on the 2-year Treasury, which tracks interest rate expectations, was down 0.06 percentage points at 5.09%.
7:00am: Subdued start expected as stocks pause after heavy falls
US stocks are expected to make a tepid start to trading, after heavy falls on Tuesday, as the market prepares for a further batch of economic updates.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.1% higher, while those for the S&P 500 rose 0.1%, and contracts for the Nasdaq 100 futures were flat.
Stocks fell sharply on Tuesday after robust jobs vacancies figures gave further credence to the belief interest rates will stay elevated for some to come.
Bond yields jumped once more and their trajectory will be closely watched again.
Deutsche Bank’s Jim Reid noted the last 24 hours saw the “relentless bond sell-off continue, with yields rising to fresh multi-year highs on both sides of the Atlantic.” Risky times, he said.
“If all that wasn't enough, the US House speaker Kevin McCarthy was ousted late last night leaving a leadership vacuum with large uncertainty as to how this will be filled ahead of the next government shutdown deadline of November 17th,” he added.
Today, the data driven Federal Reserve will have another indication as to the health of the jobs markets, plus a services sector reading.
Figures from ADP are expected to show the US added 153,000 private sector jobs in September, down from 177,000 in August, while the Institute for Supply Management’s purchasing managers’ index for services for September, is likely to fall to 53.6, down from 54.5 in August.
Factory order numbers are also due, and are expected to show an increase of 0.2% after slipping 2.1% in July.
In corporate news, ExxonMobil is due to release its third-quarter earnings considerations in a regulatory filing, offering a preview of its results.
Elsewhere, keep an eye out for comments from Fed hawk, Michelle Bowman, who will give a speech on banking reforms at a conference hosted by the Fed’s St Louis branch.