U.S. stocks end three-day decline as ADP jobs data eases rate hike expectations

Article by: Tide Research

On Wednesday, U.S. equities ended a three-day losing streak, with the S&P 500 rising 0.47% to 7,667.45, the Nasdaq Composite up 0.45% to 26,217.83, the Dow Jones Industrial Average gaining 0.56% to 53,061.95, and the Russell 2000 leading gains with a 1.13% increase. The VIX fell 6.98% to 15.20. The Nasdaq-100 rose 0.23% to 29,143.33, and the Philadelphia Semiconductor Index advanced 0.45% to 11,339.25. The market rebound was driven by two key factors: U.S. private sector job growth in August, as measured by ADP, came in at only 38,000—the lowest since January—slightly cooling expectations for a September rate hike; and strong performance across AI hardware stocks, with Dell surging 15.76% on record AI server orders, NVIDIA rising 3.20%, and Micron up 2.43%. However, software and cybersecurity stocks declined sharply, with Credo plunging 20%, MongoDB falling nearly 14%, and Palo Alto Networks dropping over 9%, signaling a sharp reallocation of capital within the tech sector. The yield on the 10-year U.S. Treasury note retreated from its intraday high to close at 4.783%.

In the U.S., private sector job growth in August reached 38,000, the lowest since January this year and significantly below market expectations, with the prior month’s figure revised up to 46,000. Wage growth for job switchers slowed to 7.3%, while wage growth for current employees remained at 4.4%. ADP’s chief economist stated that demographic shifts, persistent inflation, and the impact of AI on employment have made wage growth less predictable. Following the data release, market expectations for a September rate hike slightly declined.

However, the Fed's Beige Book sent a different signal. It indicated modest expansion in economic activity, slight growth in employment, and moderate price increases, with demand for data centers emerging as a key driver of growth. Financial markets are pricing in a 65% chance of an interest rate hike at the September 15–16 meeting, with the policy path remaining highly uncertain.

ADP points to a loosening labor market, while the Beige Book suggests the economy still shows resilience. The U.S. 10-year Treasury yield rose intraday to 4.816%, the highest since late 2023, and closed at 4.783%, down about 1.3 basis points from the previous day; the 30-year yield fell to 5.25%, and the 2-year yield stood at 4.369%. Japan’s 10-year government bond yield was at 3.016%, continuing its first breach of 3% since 1996. Long-term bond yields in Europe, the UK, and Japan also hit multi-year highs during trading.

Military tensions between the U.S. and Iran continue to escalate. Trump stated that the next round of strikes against Iran would not "last long," and the U.S. is ready to strike Iran again at any moment. Previously, Iran’s Revolutionary Guard claimed to have attacked multiple U.S. bases in Kuwait, Jordan, and Iraq using missiles and drones, resulting in "multiple U.S. personnel deaths." The U.S. Central Command subsequently announced the completion of a new round of strikes, expanding targets from air defense systems to mine-laying capabilities and communication sites. Trump also proposed renaming the Strait of Hormuz as the "Trump Strait," claiming the U.S. now controls it.

After surging on Tuesday, oil prices paused their rally on Wednesday. WTI crude rose 0.88% to $91.01 per barrel, reaching a intraday high of $92.29; Brent crude increased 1.04% to $95.63 per barrel, touching $97.04 during the session. U.S. commercial crude oil inventories decreased by 4.5 million barrels to 424.5 million barrels, while refinery utilization rates rose to 98%. Inflation concerns eased, causing the 10-year U.S. Treasury yield to retreat from its intraday peak. However, the geopolitical risk premium remains intact, as Trump’s statement that he is “ready to strike again” suggests the possibility of further escalation.

Dell was the standout name on Wednesday, surging 15.76% on record AI server orders. NVIDIA rose 3.20%, Micron increased 2.43%, and the entire semiconductor sector strengthened.

Broadcom’s earnings report was also impressive. Third-quarter net revenue increased 86% year-over-year to $29.591 billion, with AI semiconductor revenue surging 221% year-over-year to $16.7 billion. The company raised its fiscal year AI revenue guidance to $58 billion and outlined a long-term roadmap projecting $230 billion in AI revenue by fiscal year 2028.

Software and cybersecurity stocks suffered significant declines. Credo plunged 20.04%, MongoDB fell 13.54%, and Palo Alto Networks dropped 9.31%. Capital is undergoing sharp reallocation within the tech sector, shifting from software and cybersecurity stocks toward AI hardware, as order data for AI infrastructure continues to validate demand, while valuations and growth expectations for software stocks are being reassessed.

Google released Gemini 3.8 Flash, just three weeks after the previous version, marking the third iteration of the Flash model within six weeks, with a focus on long-horizon programming and autonomous agents. At the G20, Jensen Huang stated that NVIDIA is investing nearly $1 trillion in the U.S. this year, and that AI is becoming infrastructure like water and electricity, which every country must build.

The yen rose as much as 1.2% during the session to 158.22, as markets watched for potential renewed U.S.-Japan intervention. The USD/JPY pair initially touched 160.39 before retreating, closing at 158.71, down 0.89%. Over the past month, Japan’s Ministry of Finance has deployed a record $96.4 billion to defend the yen. Recent comments from Bank of Japan officials have been hawkish, and markets have nearly fully priced in a September rate hike. South Korea’s foreign exchange authorities conducted unconventional operations to absorb dollar inflows from SK Hynix to stabilize the exchange rate.

The U.S. Dollar Index fell 0.11% to 99.51. The offshore renminbi against the U.S. dollar traded around 6.7167.

Spot gold surged 1.38% in a V-shaped reversal, rebounding from an intraday low of $4,282.63 to reapproach $4,400 per ounce; spot silver rose 1.92% to $65.14 per ounce. The rebound in gold was supported by a weaker dollar.

Amid rising geopolitical risks, the Dutch central bank has relocated approximately $12 billion in gold reserves from the United States to London. Previously, France had withdrawn all of its gold from the New York Fed between July 2025 and January 2026. Bitcoin is trading at around $77,300, roughly unchanged from the previous day.

U.S. August ISM Services PMI (tonight). The ADP data has already signaled weakening employment; the ISM Services PMI will confirm whether the services sector is cooling in tandem. If the services PMI exceeds expectations, expectations for rate hikes may reignite; if it weakens, it will further ease concerns about interest rates and create room for tech stock valuation recovery.

Federal Reserve Governor Waller speaks. Waller will give an interview and deliver a speech on the inflation outlook before the Fed’s upcoming policy meeting silence period begins, and his remarks are viewed by markets as the most important official commentary ahead of the September meeting, with his wording directly shaping expectations for the interest rate path.