Dow Jones: US Stocks Mixed as ADP Payrolls Drop Fuels Fed Bets, Nasdaq Tech Gains

S&P 500 Slips as Private Payrolls Contract, Dow Outperforms on Rotation

The S&P 500 eased Wednesday after a surprise drop in private payrolls raised concerns about labor market momentum, while the Dow Jones Industrial Average outperformed as traders rotated into materials and health care. The Nasdaq lagged amid a broad pullback in tech shares, reflecting sector churn as investors weighed the potential for a Federal Reserve rate cut.

What Does ADP’s Private Payrolls Drop Signal for the Labor Market?

ADP reported private payrolls fell by 33,000 in June, missing expectations for a 100,000 gain and marking the first decline since March 2023. The bulk of losses came from professional and business services (-56,000) and health and education roles (-52,000), while goods-producing sectors added 32,000 jobs. Small businesses were hit hardest, shedding 29,000 positions, while large firms with 500+ employees expanded by 30,000. Wage growth moderated, with job stayers seeing a 4.4% pay increase, down from 4.5%, and job switchers at 6.8%, down from 7%.

Could Fed Rate Cut Hopes Anchor Market Sentiment?

The soft ADP data has fueled cautious optimism around a possible Fed pivot, with the CME FedWatch tool showing a modest increase in the odds of a July rate cut.

Strategists noted the report may redirect Fed attention toward employment softness rather than inflation persistence, though traders remain cautious ahead of Thursday’s nonfarm payrolls, expected to show a 110,000 gain, and weekly jobless claims pegged at 240,000.

How Are Tesla, Big Banks, and Sector Rotations Driving Trade?

Tesla rallied 5% premarket after Q2 deliveries of 384,000 vehicles beat investor fears despite coming in slightly below FactSet’s 387,000 estimate, providing a cushion for the Nasdaq.

Big bank stocks including JPMorgan and Goldman Sachs edged higher as they announced dividend increases and buyback plans following Fed stress test clearance.

Materials and health care sectors lifted the Dow by 400 points in the prior session, with defensive rotation evident as traders balanced softening economic signals with earnings optimism.

What Should Traders Watch Next?

Traders are laser-focused on Thursday’s government payrolls report and jobless claims for confirmation of labor market trends that could shape Fed policy expectations.

Fiscal policy developments tied to President Trump’s tax-and-spending bill and ongoing trade tensions remain additional catalysts.

While near-term volatility may persist, many analysts expect the S&P 500’s pullbacks to find support as policy clarity improves, maintaining bullish setups in sectors like materials and financials while traders monitor tech for further rotation opportunities.

More Information in our Economic Calendar.