Markets rebound after soft labor signals, as ISM Services PMI boosts investor sentiment ahead of Friday’s high-stakes payroll release.
A Shaky Start Reversed by Service Sector Strength
Markets opened Thursday on uncertain footing. The ADP private payrolls report showed only 54,000 jobs added in August—well below the 65,000 estimate. This weaker-than-expected number stoked concerns about a cooling labor market. Adding to the caution, initial jobless claims rose by 8,000 to 237,000, surpassing expectations of 230,000.
- However, continuing jobless claims came in slightly better at 1.944 million, below the anticipated 1.959 million.
- These mixed signals suggest a cautious hiring environment, where employers remain hesitant to both hire and fire.
ISM Services PMI Sparks Afternoon Rally
A turning point came with the release of the Institute for Supply Management’s (ISM) Services PMI, which rose to 52.0, beating the 51.0 consensus.
- This 1.9-point increase from the previous month reflects modest but broad-based expansion.
- According to ISM Chair Steve Miller, 12 industries reported growth in August—one more than in July.
- Although slightly below the 12-month average of 52.4, the reading reflects a resilient service sector, which drives the bulk of U.S. economic activity.
This data helped power a late-day rally, lifting the S&P 500 ETF (SPY) by 0.83% and the Nasdaq 100 ETF (QQQ) by 0.90%.
All Eyes on Friday’s Jobs Report
Investors now turn their attention to the Labor Department’s August nonfarm payrolls report, due Friday.
- Economists project 75,000 new jobs and a rise in unemployment to 4.3%.
- This marks the first payroll report since President Trump’s dismissal of Bureau of Labor Statistics Commissioner Erika McEntarfer, following downward revisions to May and June’s job data totaling 258,000.
Trump has accused McEntarfer of manipulating pre-election jobs data to aid Vice President Kamala Harris’s campaign, a claim that has further politicized the economic narrative.
Political Intrusion at the Fed
The drama extends to the Federal Reserve, where Governor Lisa Cook is under investigation by the Justice Department over alleged mortgage fraud. This comes after FHFA Director Bill Pulte, aligned with Trump, accused Cook of falsely listing two properties as primary residences.
- Trump attempted to fire Cook last month, a move she countered with a lawsuit claiming the president is attempting to undermine the Fed’s independence.
- The legal dispute raises fresh concerns about the politicization of key financial institutions, just as monetary policy remains critical for managing inflation and growth.
Market Outlook
Despite ongoing political turmoil, investors found confidence in robust services data, signaling economic resilience.
- The SPY and QQQ gains highlight continued demand for risk assets when macroeconomic indicators turn positive.
- However, the looming jobs report will likely set the tone for the next market move, especially with rate policy still hanging in the balance.
