Strong Jobs Report Creates Juice For the Market Wednesday

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Stocks rose Wednesday after the ADP jobs report beat expectations and acted as another guide post to investors looking for evidence the economy is rebounding. 

All three major U.S. indices rose, with the S&P 500 up as much as 0.8%. The 10 Year Treasury yield rose to 0.72%. Yields rise when prices fall. 

The ADP report showed the U.S. economy lost a net 2.7 million jobs, beating expectations of a net loss of 8.7 million jobs. "there are two encouraging signs in this morning’s ADP read—April’s upward revision and the fact that May’s number was substantially better than analyst expectations,” wrote Mike Loewengart, head of investment strategy at E*Trade in emailed remarks to reporters. 

More importantly, the result confirmed market expectations that the increase in unemployment is stabilizing. April’s reading was a loss of 20 million jobs. Wednesday’s result is consistent with the imprinting economic data more broadly, as the economy continues to contract year-over-year in May, but less so than in April. 

"Looking at the ADP trend line, this is one fundamental indicator with a seemingly v-shaped recovery,” Loewengart said. 

Banks were leading the rally again and have now. Banks, after significantly underperforming the S&P 500 to begin the bounce off of the March 23 low, are now leading the U.S. rally. The Invesco KBW Bank ETF  (KBWB) - Get Report is up 41% since March 23, while the S&P 500 is up 38%. This highlights not only the expanding yield curve between the two-year and 10-year treasuries, but also that value is outperforming growth, which tends to happen when investors are bullish on the economy. 

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