Stocks rose on Wednesday as investors digested weaker jobs data, with the private payrolls rising by 152,000 last month, below expectations. The optimism in the market was fueled by solid bets on at least two rate cuts in 2024, according to the CME FedWatch tool.
US stocks saw gains across all three benchmark indexes, while long-dated bond yields slumped. The 10-year Treasury yield continued its decline, dropping by two basis points to 4.308%.
The softer hiring trends reported by ADP are seen as positive news for the outlook for rate cuts, as central bankers are looking for signs of economic slowdown before adjusting monetary policy.
Investors are eagerly awaiting the more closely watched nonfarm payroll report on Friday, with expectations for job additions of about 175,000 last month. Bank of America is more optimistic, forecasting a reading of 200,000 and a drop in the unemployment rate to 3.8%.
While the Fed is expected to keep interest rates steady at the next policy meeting, investors remain bullish on the possibility of rate cuts by the end of the year. The CME FedWatch tool indicates a 60% chance of a rate cut of 50 basis points or more by year-end.
In commodities, bonds, and crypto, West Texas Intermediate crude oil rose to $73.85 a barrel, while Brent crude was higher at $78.12 a barrel. Gold prices edged higher to $2,339.99 per ounce, and the 10-year Treasury yield fell to 4.32%. Bitcoin also saw gains, climbing to $71,012.
Overall, the market is reacting positively to the weaker jobs data and the increased expectations for rate cuts, setting the stage for potential shifts in monetary policy later this year.
