ADP Report Throws Markets a Curve Ball

July 10, 2023

ADP Report Throws Markets a Curve Ball Photo

Equity and bond markets sold off sharply after last Thursday’s release of the ADP National Employment Report showed the U.S. economy added nearly 500,000 new jobs in June — more than twice the consensus estimate.1 The report called into question one of the primary drivers for the recovery in risk assets this year — the Federal Reserve (Fed) nearing the end of the current tightening cycle. 

Investors appeared to breathe a sigh of relief after Friday’s Bureau of Labor Statistics employment report came in below expectations at 209,000, but stocks and bonds resumed their selloff Friday afternoon.2 The 30-year Treasury bond closed the week at 4.05%, the highest yield since the start of the year.3

Fed officials and investors will shift their focus to inflation this week with the Consumer Price Index (CPI) out Wednesday and the Producer Price Index (PPI) out Thursday. The year-over-year headline numbers are expected to improve materially versus last month’s readings — 3.1% versus 4.0% for CPI and 0.4% versus 1.1% for PPI. Barring a favorable surprise, the core CPI — expected to come in at 5% year-over-year — is the one number likely to keep the Fed on track for another rate hike later this month.4

The barrage of Treasury debt issuance continues this week with $40 billion in 3-year notes, $32 billion in 10-year notes and $18 billion in 30-year bonds set to be auctioned. After seeing the largest weekly outflows for both investment grade and high yield exchange-traded funds in months, longer-term interest rates are likely to test the post-financial crisis levels set last October.




1ADP Research Institute – ADP® National Employment Report; June 2023

2U.S. Bureau of Labor Statistics – The Employment Situation; June 2023

3U.S. Department of the Treasury – Daily Treasury Par Yield Curve Rates; as of 7/7/23

4MarketWatch – U.S. Economic Calendar; as of 7/10/2023

Tags: Equity market | Bond markets | Employment Report | 30-Year Treasury | Federal Reserve | Consumer Price Index (CPI) | Producer Price Index (PPI)

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