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Markets Roundup: Lower ADP Kindles Hops For Softer Policy

US TSYS
  • A risk-on tone held in late trade (stocks bouncing late) after markets latched onto this morning's lower than expected ADP private employment vs. ISM Services PMI that pointed to slower albeit strong growth.
  • While there isn't a strong correlation, lower private jobs gain ahead Friday's NFP is a potential setup for softer policy expectations that have been weighing on rates and stocks the last four weeks.
  • Initially following EGBs, Treasury futures continue to reject overnight cycle lows (TYZ3 106-03.5, 10Y yield 4.8799% high) then extended the rally after ADP Employment Change comes in much lower than expected +81k vs.150k est, +177k prior.
  • Following mixed EU servicer PMI overnight, US services PMI was 50.1 (vs 50.2 flash; 50.5 prior), the composite print was 50.2 (vs 50.1 flash; 50.2 prior). "September data indicated a continued decline in new business at service sector firms"…"lower new orders were reportedly linked to weak domestic and foreign client demand".
  • Dec'23 10Y futures topped 107-00 to 107-05 high in the first half, while yield slipped to 4.7246% low. Technical resistance focus on 107-14 (High Oct 3).
  • Cross asset summary: Greenback softer (DXY -.195 at 106.805), Gold weaker (-3.98 at 1819.04), crude broadly weaker (WTI -4.67 at 84.56). Stocks back near midday highs with S&P E-Mini futures up 28.75 points (0.67%) at 4293.25, DJIA up 86.46 points (0.26%) at 33088.8, Nasdaq up 164 points (1.3%) at 13223.73.
  • Thursday Data Calendar: Weekly Claims, Trade Balance, and various Fed speakers: Cleveland Fed Mester, MN Fed Kashkari, Richmond Fed Barkin, SF Fed Daly and Fed Vice Chair Barr.
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