The US stock market perceived the strong report from ADP negatively, as everyone wants to see that the economy has weakened and expects that this will somehow affect the opinion of the Federal Reserve System. A good report says something completely different. As the latest data showed, wage growth in the private sector in the United States remained quite strong in October, which is a mediator of further inflationary pressure. Workers' wages have grown, especially in the leisure and hospitality industry.
According to ADP, companies added 239,000 jobs to the economy by the end of October, beating economists' forecasts, who expected growth of only 195,000. The data for October was revised downwards by 192,000 in September. Wages increased 7.7% year-on-year, 0.1 percentage point less than in the previous month.
As noted above, job growth was especially in the key leisure and hospitality sector, amounting to 210,000 jobs, and wage growth accelerated by 11.2%.
Meanwhile, the Federal Reserve continues to raise interest rates to reduce inflation, which has reached almost the highest level in more than 40 years. News about wages and the labor market growth will be perceived as a guide to further tightening policy – this is bad for the stock market in the short term.
Premarket
CVS gained 1.9% in premarket trading after the company reported higher-than-expected revenue and profit for the latest quarter. The company also raised its annual forecast.
Estee Lauder cosmetics maker's shares fell 11.5% in premarket trading after the company issued a weaker-than-expected forecast, citing higher costs, a stronger US dollar, and quarantine in China.
Shares of Paramount, a media company, fell 8.5% in premarket trading after a disappointing report.
Livent shares lost 4.7% in premarket trading after the company lowered its annual sales and profit forecast. Livent said that inflation and other economic factors are reducing the production of metal used in batteries for electric vehicles.
Match Group shares rose by 14.7% before the start of the regular session after the dating service operator reported higher-than-expected quarterly revenue, helped by an increase in the number of paid subscriptions to its Tinder service.
As for the technical picture of the S&P500, after yesterday's decline, demand for the index remains rather sluggish. The main task for buyers now is to protect the support of $3,835. As long as trading is conducted above this level, we can expect continued demand for risky assets, especially if the Fed loosens its grip. This will also create good prerequisites for further strengthening the trading instrument and returning $3,861 under control, just above which $3,905 and $3,942 are located. Only such a scenario will strengthen the hope for an upward correction with an exit to the resistance of $3,968. The furthest target will be the $4,000 area. In the case of a downward movement, buyers are simply obliged to declare themselves in the region of $3,835. A breakdown of this range will quickly push the trading instrument to $3,808 and open up the possibility of updating the support of $3,773.
