ADP Employment Heightens Rate Cut Chances Despite Strong Spending

Employment Data - The ADP private payroll data reported a loss of 32,000 jobs, primarily affecting small businesses, which lost a total of 120,000 jobs across various employee size categories [1][2] - Small businesses with 1 to 19 employees lost 46,000 jobs, while those with 20 to 49 employees lost 74,000 jobs. In contrast, medium and larger businesses gained jobs, with medium-sized businesses (50 to 249 employees) adding 31,000 jobs, and large companies (500+ employees) gaining 39,000 jobs [2] Industry Breakdown - The construction sector lost 9,000 jobs, manufacturing lost 18,000, and the information sector lost 20,000 jobs. However, education and health services gained 33,000 jobs, marking it as the biggest gainer in the report [3] Wage Data - Wage growth for job stayers decreased from 4.5% to 4.4%, while job changers saw a decline from 6.7% to 6.4%. This indicates weaker-than-expected wage growth, which may influence the Federal Reserve's focus on the labor market rather than inflation [4] Federal Reserve Outlook - There is now an estimated 89% chance of a 25 basis point rate cut by the Federal Reserve in December, reflecting the current labor market conditions and wage data [5] Consumer Behavior - Despite concerns about the economy, US consumer spending during the Christmas holiday season has shown strength, with solid numbers reported from the Thanksgiving holiday and Cyber Monday [8] Valuation Concerns - The overall S&P 500 is noted to have lofty valuations, suggesting that while some stocks may be undervalued, the market as a whole is not cheap [10] Nvidia and AI Regulation - Jensen Huang, CEO of Nvidia, is lobbying against potential regulations on AI, emphasizing the need for the US to maintain its competitive edge in AI development. He is also addressing concerns regarding export controls related to advanced chips to China [11][12]