Gold Rallies, Stocks, Bitcoin Trim Losses After Soft Payroll Report Signals Slower Growth

Stock Market Bounces as Softer ADP Report Fuels Fed Rate Cut Hopes

U.S. stock market futures rebounded on Wednesday after weaker-than-expected private payroll data signaled a cooling labor market. This shift renewed optimism that the Federal Reserve may ease its stance on interest rates sooner than anticipated.

Treasury yields and the U.S. dollar retreated, while gold prices rose as investors adjusted their outlook. The S&P 500 and Nasdaq 100 pared early losses, and Bitcoin followed suit, reflecting a broader appetite for risk.

ADP Report Points to Slower Job Growth

Private sector employers added 122,000 jobs in December, falling short of the 136,000 forecast by economists. This marked the smallest increase since August, down from the revised 146,000 in November. ADP also reported that wage growth slowed to its weakest pace since July 2021.

“The labor market downshifted to a more modest pace of growth,” noted ADP’s chief economist Nela Richardson. This cooling in hiring and pay growth could ease inflationary pressures, reinforcing expectations of a softer Fed approach.

Jobless Claims Show Labor Market Stability

Despite the slowdown in hiring, jobless claims painted a mixed picture. Initial unemployment filings dropped to 201,000 for the week ending January 4, lower than the 215,000 expected by economists. This marked the lowest level in nearly a year.

Continuing claims, however, rose by 33,000 to 1.87 million, suggesting some workers are struggling to find new employment. The dip in initial claims reflects employer reluctance to cut staff, indicating lingering strength in the labor market.

Market Reactions Reflect Rate Cut Bets

Following the ADP report, stock futures pared earlier losses as traders bet on a potential shift in Fed policy. The softer labor data eased fears that the Fed might delay interest rate cuts, contributing to a pullback in bond yields and a weaker dollar.

Gold prices climbed on the dollar’s retreat, while equities gained across the board. The S&P 500 and Nasdaq 100 clawed back from early-session declines, signaling renewed confidence in risk assets.

Outlook for Traders

Markets are now focused on the Federal Reserve’s December meeting minutes, set for release later today. Any hint of dovish sentiment could further lift stocks and weigh on yields.

In the short term, expect volatility, but the softer ADP data points to a bullish tilt as traders anticipate a less aggressive Fed. A stronger labor market narrative, however, could cap gains if jobless claims continue to trend lower.

More Information in our Economic Calendar.