Three Reports, Three Volatile Reactions as Economy Heats Up

Wednesday is shaping up to be a headline driven session with several key reports influencing the price action. The market moving news includes reports jobs, services and energy.

ADP Report

U.S. stocks and U.S. Treasury yields moved higher after ADP and Moody’s Analytics reported that job growth surged in September to its highest level in seven months.

According to the report, private companies added 230,000 more positions for the month, the best level since the 241,000 jobs added in February and well ahead of the 168,000 jobs added in August. The report beat the estimate of 185,000 jobs.

The breakdown showed construction jobs grew by 34,000 as goods-producing industries overall contributed 46,000 to the final count.

Additionally, job gains were spread across industries, as services led with 184,000. Professional and business services contributed 70,000, while education and health services was next with 44,000, and trade, transportation, and utilities added 30,000. Leisure and hospitality and financial services each saw growth of 16,000.

Surprisingly, the jump in payrolls came despite the disruption of Hurricane Florence. However, experts noted that the ADP methodology is such that it doesn’t include the storm victims because it only counts employees on payroll and doesn’t account for those displaced by temporary credits.

Traders are saying that the strength in the ADP report probably means the unemployment rate could fall to near 3 percent over the next year.

ISM Non-Manufacturing Index

In addition to the ADP report, investors were also reacting to a bullish services report. The ISM non-manufacturing index rose to 61.6 last month, its highest level since the index was created in 2008. Economists were looking for a reading of 58.

Following the release of the economic reports, the Dow Jones Industrial Average soared to a new all-time high and the 30-year Treasury yield hit 3.27%, its highest level since 2014.

U.S. Energy Information Administration

A third market moving event was the release of the bearish U.S. Energy Information Administration weekly inventories report.

Crude oil prices fell on Wednesday after the EIA report showed a big jump in U.S. crude stockpiles and top exporter said it increased output to near a record high.

The EIA said commercial crude stored in the United States rose by 8 million barrels in the week through September 28. Gasoline stocks fell by 459,000 barrels, compared with analysts’ expectations for a 1.3 million-barrel gain. Distillate stockpiles dropped by 1.8 million barrels, versus expectations for a 1.3 million-barrel drop, the EIA data showed.

Crude stocks at the Cushing, Oklahoma futures delivery hub rose by 1.7 million barrels, the EIA said.

In other crude oil related news, Saudi Energy Minister Khalid al-Falih said on Wednesday the kingdom had raised output to 10.7 million barrels per day in October. That would be just short of the record high for Saudi output of 10.72 million bpd in November 2016.