Dow Jones Industrial Average climbs after weak ADP bolsters Fed rate cut bets

• The Dow Jones rose over 250 points on Thursday, bolstered by rising hope for Fed rate cuts.
• US ADP jobs numbers came in well below expectations, sending rate cut expectations even higher.
• This Friday's NFP jobs report will be a barn-burner for market participants.

The Dow Jones Industrial Average (DJIA) hit the bids running on Thursday, climbing over 250 points after disappointing ADP jobs data counterintuitively sent equity markets rallying. Softer-than-expected advance payroll figures implied that the US labor market may continue softening in the near term, bolstering market bets that the Federal Reserve (Fed) will be bullied into delivering an interest rate cut on September 17.

The Dow Jones still remains in the red for the week, but only slightly, within touch range of the week's opening bids and trailing just behind the 45,600 level. The major index is poised for a fresh break toward new record highs above 45,760, but only if US Nonfarm Payrolls (NFP) data plays bullish ball on Friday.

ADP Employment Change numbers from August showed an even steeper slowdown in hiring than expected, clocking in at just 54K compared to the expected 65K and falling sharply from the previous 106K. Initial Jobless Claims also ticked higher, rising to 237K on a weekly basis, over and above the expected 230K, albeit slightly.

Markets find their Goldilocks data releases as ADP jobs decline, but PMIs climb

The Services Purchasing Managers Index (PMI) from the Institute for Supply Management (ISM) rose for a third straight month to 52.0 in August, adding further bullish support for equities on Thursday. Looking further into the report, overall firm responses were bullish on near-term activity outlooks because consumer demand remains steady, putting pressure on logistics and deliveries that are struggling to keep up.

However, the inventory sentiment segment showed a 28th consecutive month of expansion, implying that a lot of recent economic activity is owing to businesses hoping to fill warehouse space at the last minute before tariffs become a real problem. The backlog component also showed its lowest reading since mid-2009 as future orders dry up in the face of ongoing trade turmoil.

US wages and NFP net job additions are on the docket on Friday and will be drawing full-market attention for this iteration of the monthly figure. The NFP is expected to hold steady at 75K in August, a slight uptick from the previous month's 73K. Softening US labor figures are viewed broadly as a requirement for the Federal Reserve (Fed) to resume cutting interest rates at its upcoming rate call on September 17, and investors are launching themselves into the bullish side ahead of Friday's bumper employment report.

Dow Jones daily chart