Wall Street Lunch: ADP’s Jobs Report In Spotlight Amid Government Shutdown

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With BLS down to one person, ADP payrolls jolt market with 32K drop. (0:15) White House withdraws BLS chief nominee. (1:39) Supreme Court halts immediate ouster of Fed’s Lisa Cook. (1:55)

This is an abridged transcript of the podcast:

Our top story so far, long the black sheep of the economic data family, ADP’s jobs report is now having its moment in the sun — and an outsize impact on the market.

With the government shut down, the Bureau of Labor Statistics is down to just one employee — deputy commissioner William Wiatrowski.

And in the absence of weekly jobless claims figures Thursday and September jobs report Friday, the much-maligned ADP report is suddenly in the spotlight.

ADP private sector payrolls fell by 32,000 in September, against expectations for a 50,000 gain. August was revised down to a 3,000 loss from a 54,000 gain.

The markets were quick to react. Stocks cut losses and long-term Treasury yields fell. Odds of two quarter-point Fed rate cuts this year rose about 10 percentage points to nearly 90%.

But Pantheon Macro economist Oliver Allen still thinks “that the ADP provides very little information of value.”

“The initial ADP estimates for private employment flagged the slowdown in the official payrolls numbers between March and June, but overstated its magnitude,” he said “Moreover, ADP pointed to a rebound in payroll growth in July that never materialized, while its longer-term forecasting record also is poor.”

UBS Chief Economist Paul Donovan says: “Private data is like viewing the economy through a keyhole — clear, but with a narrow field of vision.”

“Official data is like opening the door,” he added. “Private data relies on official data to model the bits of the economy outside its field of vision, and that modeling becomes less accurate in the absence of official data.”

Meanwhile, the White House pulled its nomination of economist E.J. Antoni to head the BLS.

The Wall Street Journal says it’s unclear why, but a new candidate is expected soon. President Donald Trump had nominated Antoni after firing Erika McEntarfer in August, claiming the agency rigged jobs data.

Also in the economic sphere, the Supreme Court refused to allow Trump to immediately oust Federal Reserve Governor Lisa Cook.

The court will listen to arguments of the case in January, and Cook will remain a Fed governor for now.

Trump moved in late August to fire Cook over allegations of mortgage fraud, which she denies. Last month, the administration asked SCOTUS for an emergency order to fire Cook after lower courts allowed her to participate at the September FOMC meeting.

Among active stocks, Nike (NYSE:NKE) is up post-earnings as investors looked at the report as an early sign of a turnaround, despite a forecast for another quarter of negative growth. Wholesale revenue was a bright spot in Q1 as partnerships with Amazon (AMZN) and Foot Locker (DKS) paid off.

Needham analyst Tom Nikic said: “Although some sources of pressure persist (China, e-commerce traffic, Dunks), it seems as though trends are generally heading in the right direction. That said, we are lowering our estimates due primarily to incremental tariff headwinds since the last EPS print.”

Reddit shares (RDDT) are in the red following media chatter that ChatGPT owner OpenAI is looking to reduce Reddit citations.

AES (AES) is rallying following a Financial Times report that BlackRock’s (BLK) Global Infrastructure Partners is set to acquire the utility company in the coming days.

The deal reportedly would value AES, which owns and operates power plants across the U.S. and in 13 other countries, at about $38 billion, including its $29 billion in debt.

And Fermi (FRMI), the data center REIT co-founded by former U.S. Energy Secretary Rick Perry, priced 32.5 million shares through at $21 apiece in its IPO, near the top of its expected range. It raised about $683 million, with the IPO valuing the company, which has yet to record any revenue, at $10 billion.

The shares trade today on the Nasdaq Select Market and Thursday on the London Stock Exchange under the ticker symbol “FRMI.”

And in other news of note, Golden Week in China runs from October 1-7. The major national holiday celebrates the founding of the People’s Republic of China. Government officials anticipate 2.4 billion journeys over the holiday, up 3.2% from last year’s level. Major cities such as Guangzhou, Beijing and Shanghai are expected to attract the most visitors.

For investors in the consumer sector, it is one of the nation’s most important travel periods due to a surge in domestic tourism, retail spending, hospitality bookings and entertainment consumption. Analysts think many industries could see double-digit growth from last year’s Golden Week-related sales due to an increase in consumer activity.

A broad list of some of the companies that could see a lift includes JD.com (JD), Alibaba (BABA), Trip.com (TRIP), H World Group (HTHT), LVMH Moët Hennessy (OTCPK:LVMHF), Disney (DIS), Yum China (YUMC), Starbucks (SBUX) and Chow Tai Fook Jewellery Group (OTCPK:CJEWF).

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