Stock Market Today: Stocks higher on Fed rate cut bets as jobs data softens

Softening jobs data and a slowing economy have revived bets that the Federal Reserve will cut interest rates.

Jun 5, 2024 - 18:30

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Stock Market Today: Stocks higher on Fed rate cut bets as jobs data softens

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U.S. equity futures nudged higher Wednesday, while Treasury yields held steady, as investors looked to another key labor market reading and the first of two major central bank interest rate decisions to confirm growing confidence that the Federal Reserve will begin its policy easing later in the autumn.

Updated at 8:31 AM EDT

Job market cracks

Private sector hiring slowed modestly last month, payroll processing group ADP reported, while wage gains for job-changes fell to the lowest level in three years, adding to evidence of a slowing labor market.

ADP said 152,000 new jobs were added last month, the lowest tally since January, while the April total was revised modestly lower to 188,000.

“Job gains and pay growth are slowing going into the second half of the year,” said Nela Richardson, chief economist, ADP. “The labor market is solid, but we're monitoring notable pockets of weakness tied to both producers and consumers.”

Stock Market Today

Stocks ended higher across the board on Tuesday amid the biggest two-day pullback of the year for U.S. Treasury yields following Labor Department data that showed a surprising level of slack in the long-resilient job market.

Just over 8 million positions went unfilled in April, according to the department's Jolts report, a near 300,000 decline from March levels and the lowest in more than three years.

Wall Street will focus on another key labor market reading Wednesday following a bigger-than-expected decline in April job openings.

The reading puts further focus on today's National Employment Report from payroll processing group ADP, slated for 8:30 am Eastern Time. That report is expected to show around 173,000 private sector jobs were created last month.

The Institute for Supply Management will also publish its final reading of nonmanufacturing activity in May at 10 am Eastern.

The Bank of Canada will unveil its latest interest rate decision at 9:45 am Eastern Time, with economists expecting Governor Tiff Macklem to deliver a 25 basis point reduction in the so-called prime rate, taking it to 4.75%.

The European Central Bank, meanwhile, is expected to make a similar move Thursday in Frankfurt, with bets that President Christine Lagarde will reduce the benchmark deposit rate, which currently sits at 4%, to 3.75%.

The softening economic data, as well as the first incremental easings from other central banks, have investors adding to bets that the Fed will implement the first of its rate cuts in September.

The CME Group's FedWatch pegs the odds of a September rate cut at around 65%, up from less than 50% late last month, with the chances of a second cut before the end of the year beginning to mount.

Benchmark 2-year Treasury note yields were last marked at 4.787%, after testing the 5% level last month, while 10-year notes were largely steady at 4.345%.

On Wall Street, futures contracts tied to the S&P 500 suggest a 12-point opening-bell gain, with the Dow Jones Industrial Average called 33 points higher and the Nasdaq set for an 85-point advance.

Stocks on the move include Hewlett Packard Enterprise (HPE) , the cloud-focused tech group spun from the former HP, which surged 14.5% in premarket trading following a solid revenue outlook tied to robust artificial-intelligence demand.

CrowdStrike (CRWD) shares were also on the move, rising 7.25%, after the cybersecurity group posted better-than-expected fiscal-first-quarter earnings and a solid near-term forecast.

Discount retailer Dollar General (DG) was marked 3.1% higher following a report from The Wall Street Journal that suggested the group is looking to sell its Family Dollar division.

More Wall Street Analysts:

In overseas markets, Europe's Stoxx 600 rose 0.65% in Frankfurt ahead of tomorrow's ECB rate decision, while Britain's FTSE 100 added 0.31% in London.

Overnight in Asia, the regionwide MSCI ex-Japan index rose 1.04% into the close of trading, while the Nikkei 225 closed 0.89% lower in Tokyo.