S&P 500, Nasdaq rise to kick off September action but Dow lags after ADP jobs report

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U.S. stocks mostly traded higher Wednesday morning, even after a report on private-sector employment in August came in below forecasts, ahead of Friday’s monthly government jobs report that is expected to inform the timing of the Federal Reserve’s reduction of bond purchases that helped to support financial markets during the pandemic.

What are major indexes doing?
  • The Dow Jones Industrial Average DJIA, -0.09% fell 54 points, or 0.2%, to around 35,308, weighed by declines in Caterpillar Inc. CAT, -1.27%, Home Depot Inc. HD, -0.96%, and UnitedHealth Group Inc. UNH, -0.93%
  • The S&P 500 SPX, +0.20% gained more than 6 points, or 0.1%, to about 4,529, at last check.
  • The Nasdaq Composite Index COMP, +0.65% rose 84 points, or 0.5%, to reach 15,343.

On Tuesday, the Dow DJIA, -0.09% fell 39 points, or 0.1%, to 35,360, in line with the S&P 500 SPX, +0.20%, which fell 0.1% to 4,522.68 and the Nasdaq COMP, +0.65%, which closed just below flat at 15,259.24.

What’s driving the market?

The gain in private sector jobs in August was weaker than expected in ADP data published Wednesday, but that might be a good thing for a market that is anxious about the start of the end of easy-money policies that have been credited as a key source of record-setting prices for stocks and other assets.

On Wednesday, the private sector report on employment from Automatic Data Processing showed an increase in August of 374,000 jobs, far weaker than the 600,000 forecast by economists surveyed by The Wall Street Journal. On top of that, July’s rise in jobs was reduced to 326,000 from 330,000.

“The private payrolls numbers have been all over the map during the pandemic, and often not the strongest indicator of how the rest of the jobs report will play out.” wrote Mike Loewengart, managing director investment strategy at E-Trade Financial in emailed remarks.

“But with so much pressure on improvement on the labor market front coming from the Fed, this could send a signal that jobs growth is stagnating. That’s likely a good thing for the markets though as it means easy money policy continues,” he wrote.

To be sure, the ADP report has a poor record month-to-month in signaling results for the Labor Department’s more closely followed nonfarm payrolls. However, the data does raise some questions about the health of the jobs market in the midst of the spread of the coronavirus delta variant in some states.

“The relatively muted 374,000 increase in the ADP measure of private employment in August would appear to suggest that the recent surge in virus cases is weighing on the economy,” wrote Andrew Hunter, senior U.S. economist at Capital Economics, following the private-sector data.

The weak data in jobs comes after China’s Caixin manufacturing purchasing managers index, or PMIs, for August confirmed Tuesday’s official figures to show that Chinese factory activity contracted last month. Data from seven Southeast Asian countries in the ASEAN bloc also showed that manufacturing activity contracted for the first time since May 2020.

“That rounds out a grim week for China’s PMIs as Covid-19 lockdowns and the same supply chain challenges the rest of the world is experiencing erode economic performance,” said Jeffrey Halley, an analyst at broker OANDA.

In other U.S. economic data, the IHS Markit manufacturing purchasing managers index posted 61.1 in August, down from 63.4 in July, and broadly in line with the earlier released ‘flash’ estimate of 61.2. A reading of 50 or greater indicates improving conditions.

“US goods producers continued to register marked upturns in output and new orders in August, as demand flourished once again,” Sian Jones, Senior Economist at IHS Markit said. “That said, constraints on production due to material shortages exerted further pressure on capacity as backlogs of work rose at a near-record rate.”

Following the Markit data, the Institute for Supply Management’s manufacturing index showed a rise to 59.9 in ​August from 59.5 in the prior month, and a report on U.S. construction spending increased 0.3% in July.

In other news, market participants were watching developments in a meeting between the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, including Russia and Saudi Arabia, which were gathering to discuss output plans.

Which companies are in focus?
  • Walmart IncWMTwill host hiring events on September 8 and September 9 during which the retail giant plans to add 20,000 supply chain associates. 
  • Robinhood Markets Inc. HOOD disclosed Wednesday that the Securities and Exchange Commission staff is reviewing the zero-commission trading platform’s registration statement filed on Aug. 5 for the sale of up to 97.9 million shares of common stock by selling shareholders.
  • Shares of Apple Inc. AAPL are in focus Wednesday after The Wall Street Journal reported that the technology behemoth will eventually include a tool to monitor blood pressure and a thermometer to help with fertility planning in its smartwatches.
  • Vera Bradley IncVRA shares plunged 15.4% in Wednesday premarket trading after the accessories company reported fiscal second-quarter profit and sales that missed expectations.
  • FAT Brands Inc. FAT said Wednesday it agreed to pay $300 million to buy Twin Peaks, a Dallas-based chain of more than 100 sports lodges offering cold draft beer, from seller Garnett Station Partners LLC, the New York-based private-equity firm.
  • Campbell Soup Co. CPB reported fiscal fourth-quarter net income of $288 million, or 95 cents per share, up from $86 million, or 28 cents per share, last year.
  • Dollar General Corp. DG said Wednesday that it is looking for store employees, distribution center workers and drivers with a commercial driver’s license (CDL) for its private fleet. 
  • Shares of Nio IncNIO slumped Wednesday, after the China-based electric vehicle maker cut its third-quarter deliveries outlook, citing the “uncertainty and volatility” of semiconductor supplies. 
How are other markets faring?
  • In Asia, Tokyo’s Nikkei 225 NIK, +1.29% surged 1.3%, while the Hong Kong Hang Seng Index HSI, +0.58% lifted 0.6% and the Shanghai Composite SHCOMP, +0.65% rose 0.7%.
  • Chinese technology stocks JD.com 9618, +1.63% and Tencent 700, +1.50% were standouts in Asian trading, helping the Hang Seng Tech Index HSXTCHINDXXX, +1.30% outperform and rise 1.3%.
  • London’s FTSE 100 UKX, +0.40% was 0.5% higher, and the pan-European Stoxx 600 SXXP, +0.48% also was trading up 0.5%; in Paris, the CAC 40 PX1, +1.21% climbed 1.2% and Frankfurt’s DAX DAX, -0.14% declined 0.2%.
  • Oil prices were trading sharply lower, with the U.S. benchmark CL00, falling 1.6% to $67.42 a barrel; international benchmark Brent BRN00, -1.07% crude was 1.5% lower at $70.62 a barrel.