Stocks Rise As Bets Fed Will Cut Rates Sink Dollar: Markets Wrap

A slew of economic data did little to alter bets the Federal Reserve will cut rates in its final policy meeting of 2025, driving US stocks higher as the dollar fell against all major currencies. Bonds wavered.

Over 300 shares in the S&P 500 advanced. Microsoft Corp. pared losses by about half as CNBC reported that the software giant has not lowered sales quotas for its salespeople. The shares sank as much as 3% earlier Wednesday after the Information said the firm had cut expectations for getting business customers to spend money on new AI products.

US companies shed payrolls in November by the most since early 2023, adding to concerns about a more pronounced weakening in the labor market. Separate data showed services activity expanded at a slightly faster pace in November, while a measure of prices paid dropped to a seven-month low.

Policymakers have been torn as to whether they’ll cut rates for a third straight meeting as they attempt to balance the slowdown in the job market with still-elevated inflation. Investors, however, widely expect the Fed to lower borrowing costs next week.

“The faltering labor market will be the focus for the Fed at their December meeting,” said Jeff Roach at LPL Financial. “Since earlier this year when we started to see a material weakening in the jobs market, I have believed labor demand is weak enough for the Fed to cut, including this month.”

The S&P 500 rose 0.1%. The yield on two-year Treasuries was little changed at 3.50%. The dollar fell 0.3%.

Private-sector payrolls decreased by 32,000, according to ADP Research data. The median estimate of economists called for a 10,000 gain.

“This morning’s ADP data confirm what a lot of the doves are saying – it’s more important to focus on a weakening labor market than to worry about inflation in the 2-3% range (but still above the 2% target),” said Chris Zaccarelli at Northlight Asset Management. “Although there may be some dissents at next week’s Fed meeting, it is a sure thing that a 25 basis-point rate cut will be announced.”

But going forward is where things get more confusing, he noted.

“Our expectation is that the doves will win out and we will see a number of rate cuts next year, but we think they may be more spaced out and potentially less cuts will be made than are currently being forecast, which is why we are bullish into the new year, but more cautious once we arrive in 2026,” he said.

Today’s ADP data keeps a December rate cut thoroughly in play, noted David Russell at TradeStation. 

“Main street is hurting as months of uncertainty and tariffs take a toll. AI is supporting parts of the economy but many small businesses don’t benefit,” he said. “The fact wages aren’t falling suggests this is a crisis of confidence in parts of the economy, and not the result of an actual recession.”

“While it’s difficult to distinguish between -32,000 and flat job growth given the volatility of the estimate, the message is clear: US job creation has given another sign of stalling,” said Florian Ielpo at Lombard Odier Asset Management.

The latest jobs reading still appears to support the ongoing rally, fueled by a duration effect - lower long-term yields driven down by Fed cut expectations act as an apparent risk-on catalyst for equities, Ielpo noted.

“However, this is only superficial – the key question now is: what will the Fed actually do with this data given such a divided board of voters? Monday’s Industry ISM and today’s ADP report are screaming ‘cuts!’ and markets will likely echo this sentiment,” he said.

“The modest fall in the ADP payrolls measure in November, coming on the back of a similar message from the Fed’s Beige Book, should be enough to persuade the FOMC to vote for another cut next week,” said Stephen Brown, at Capital Economics.

Looking through the month-on-month volatility, however, Brown noted that the broader message from the alternative indicators appears to be that labor market conditions are stable rather than deteriorating markedly. 

“Accordingly, the Fed is still likely to accompany a further cut next week with more hawkish messaging about the prospect for future loosening,” he said. 

While the latest government report showed a larger-than-expected rise in payrolls, the gain was concentrated in just a few industries. The unemployment rate ticked up to an almost four-year high, and there’s been a steady drumbeat of layoff news from companies.

“Right now, the data argues for additional Fed funds rate cuts. US labor demand is weak, consumer spending is showing early signs of cracking, and upside risks to inflation are fading,” said Elias Haddad at Brown Brothers Harriman & Co.

• Marvell Technology Inc. rallied after reassuring investors that its custom chip-design unit is winning repeat orders, signaling continued growth as the company benefits from runaway spending on AI computing.

• Delta Air Lines Inc. expects to take a $200 million profit hit in the final quarter after the carrier was forced to slash flights due to the recent record government shutdown.

• American Eagle Outfitters Inc. posted third-quarter results that outpaced expectations and raised its outlook as the apparel chain pivots quickly from weakness earlier this year.

• The London Stock Exchange Group Plc has agreed a deal with OpenAI that will give ChatGPT access to its licensed financial news and data.

• Uber Technologies Inc. is launching autonomous rides with Avride Inc. in Dallas as part of a previously announced partnership, marking the latest US city where the ride-hailing giant is offering such a service.

• Royal Bank of Canada beat estimates on strong results in its capital-markets and wealth-management divisions, capping off a year of brisk trading activity, and set higher targets for returns on shareholders’ capital.

• National Bank of Canada beat estimates on better-than-expected results at its capital-markets unit in the fiscal fourth quarter, a resurgence for the division after it posted strong results earlier in the year but missed forecasts in the previous quarter.

• Glencore Plc plans to boost annual copper production to about 1.6 million tons by 2035 as the miner seeks to reverse a slump in its output of the metal, but was also forced to lower its ambitions for next year.

• Hugo Boss AG forecast a decline in sales and earnings next year as the German fashion house seeks to recover from a challenging period by streamlining its product range and raising prices.

• An Hermès heir is suing conglomerate LVMH and its billionaire CEO Bernard Arnault in a Paris civil court in a bid to recover about €14 billion ($16.3 billion) for his alleged lost shares in the maker of Birkin handbags.

• Zara owner Inditex SA’s sales accelerated in November, highlighting its resilience in the face of weakening consumer sentiment that’s hitting many of its peers. Shares soared the most in five years.

• ByteDance Ltd.’s TikTok will invest more than 200 billion reais ($37.7 billion) to build a data center in Brazil, marking its first project in Latin America.

• At least three investors in a China Vanke Co. bond maturing this month have signaled to the embattled developer that they will oppose a plan to delay repayment, people familiar with the matter said.

Stocks

• The S&P 500 rose 0.1% as of 10:51 a.m. New York time

• The Nasdaq 100 was little changed

• The Dow Jones Industrial Average rose 0.4%

• The Stoxx Europe 600 rose 0.2%

• The MSCI World Index rose 0.3%

• Bloomberg Magnificent 7 Total Return Index rose 0.4%

• The Russell 2000 Index rose 1.1%

• Microsoft fell 1.7%

• Marvell Technology rose 4.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%

• The euro rose 0.3% to $1.1657

• The British pound rose 0.9% to $1.3326

• The Japanese yen rose 0.4% to 155.32 per dollar

Cryptocurrencies

• Bitcoin rose 1% to $92,506.89

• Ether rose 2.9% to $3,084.03

Bonds

• The yield on 10-year Treasuries was little changed at 4.08%

• Germany’s 10-year yield was little changed at 2.75%

• Britain’s 10-year yield declined three basis points to 4.44%

• The yield on 2-year Treasuries was little changed at 3.50%

• The yield on 30-year Treasuries was little changed at 4.75%

Commodities

• West Texas Intermediate crude rose 1.2% to $59.35 a barrel

• Spot gold rose 0.3% to $4,220.38 an ounce