Daily Market Color

ADP Data Beats Estimates Handily Ahead of Jobs Report

Treasurys and equities fall after data releases, Fed commentary. Treasury yields rose across a flattening curve today, the 2-year yield rising ~10bps to 4.46% and the 10-year yield climbing ~4bps to 3.71%. The ADP private payrolls report was the primary catalyst, which showed a ~235k increase in December private payrolls, much higher than the forecast of 150k. The strong report set the stage for tomorrow’s jobs report, the first since the Fed’s more modest 50bp rate hike last December.

Fed’s Bullard hints that rates are reaching terminal level. St. Louis Fed President Jim Bullard said today that interest rates are nearing their terminal rate, pointing to signs of cooling price pressures. That said, Bullard acknowledged that the policy rate is not yet high enough, but that the 5.1% median projection for rates at the end of 2023 should be sufficient. Bullard also noted that real GDP growth appears stronger in 1H22 than originally thought.

Day ahead. Nonfarm payrolls for December will be announced at 8:30 AM ET. Forecasts call for the report to show an increase of 202,000 jobs, and for the unemployment rate to remain steady at 3.7%. Fed members Lisa Cook (neutral voter), Raphael Bostic (hawkish non-voter), and Thomas Barkin (hawkish non-voter) are scheduled to make public comments later in the session.

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