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Will Strong ADP, Hawkish Fed Minutes Lift Yields and Spark Volatility in Risk Assets?

By:
James Hyerczyk
Updated: Jan 8, 2025, 13:23 GMT+00:00

Key Points:

  • Traders await ADP jobs data and Fed minutes, with markets bracing for sharp swings in equities, bonds, and the dollar.
  • ADP report forecasts 139K jobs, with jobless claims seen rising slightly to 214K—key data for Fed rate path decisions.
  • Fed minutes today could reveal divisions on rate cuts, potentially driving Treasury yields and the U.S. dollar higher.
  • Nasdaq dropped 2% Tuesday as rising Treasury yields pressured tech stocks. Will today’s data repeat the sell-off?
  • Bitcoin tumbled after strong labor data, with rate cut doubts fueling risk-off sentiment across speculative assets.
Market Volatility

In this article:

Will Today’s Economic Data Spark Volatility Across Markets?

Markets are on edge as traders brace for the release of the ADP Non-Farm Employment Change report and weekly jobless claims, followed by the Federal Reserve’s December meeting minutes. These reports are set to drive significant market action, echoing Tuesday’s sell-off triggered by stronger-than-expected economic data.

Daily US Government Bonds 10-Year Yield

Investors are particularly alert to how these data points might shape the Fed’s policy path, with Treasury yields, equities, the U.S. dollar, and even Bitcoin likely to react. With recent economic reports reinforcing expectations of slower rate cuts, market participants are positioned for potential volatility throughout today’s session.

How Will ADP and Jobless Claims Impact Markets?

The ADP Non-Farm Employment report, due at 13:15 GMT, is expected to show the private sector added 139,000 jobs, a slight decline from November’s 146,000. At 13:30 GMT, initial jobless claims are forecast at 214,000, marginally higher than the previous week’s 211,000. These figures will provide critical insight into the labor market’s strength, directly influencing expectations for the Fed’s rate-cutting timeline.

Stronger-than-expected results could reignite concerns that the labor market remains resilient, potentially delaying further rate cuts. Conversely, weaker data might bolster hopes for more aggressive monetary easing, which could support equities and pressure Treasury yields lower.

Will the Fed Minutes Signal a Slower Pace of Rate Cuts?

The Federal Reserve will release the minutes from its December meeting at 19:00 GMT. While the central bank reduced its benchmark rate by 25 basis points—the third consecutive cut—Fed Chair Jerome Powell emphasized a cautious approach moving forward. Any hints within the minutes about divisions among policymakers or the likelihood of fewer cuts in 2025 could drive markets sharply.

A hawkish tone from the minutes could lift Treasury yields and strengthen the U.S. dollar, while a dovish stance may lead to bond buying, easing yields, and potentially boosting risk assets like equities and cryptocurrencies.

How Did Markets React to Tuesday’s Reports?

Daily E-mini S&P 500 Index

Tuesday’s JOLTs report and ISM services data triggered a sell-off in tech stocks, sending the Nasdaq down nearly 2%, with the S&P 500 and Dow Jones dropping over 1% and 0.4%, respectively. Treasury yields spiked, with the 10-year yield hitting an eight-month high of 4.699%. Nvidia, Tesla, and Meta all posted significant losses, reflecting the sensitivity of growth stocks to rising yields.

Daily Bitcoin (BTCUSD)

Bitcoin also fell sharply as higher yields diminished the appeal of risk-on assets. As the Fed signals slower rate cuts, investors are shifting toward safer, yield-bearing instruments, driving bond yields higher and weighing on speculative assets.

Market Forecast: Volatility Ahead as Traders Digest Economic Data

Traders should expect continued volatility as markets digest labor data and Fed signals. A hotter-than-expected ADP report or lower jobless claims could push Treasury yields higher and pressure equities, while weaker data may provide relief, lifting stocks and softening the dollar.

As the Fed minutes loom, markets remain in a fragile state, with rate expectations for 2025 increasingly tied to the strength of incoming economic data. Any divergence from expectations could drive significant market moves, particularly in Treasuries, equities, and the dollar.

More Information in our Economic Calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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