US stocks inched up on Wednesday as investors digested a weaker-than-expected ADP jobs report, reflecting a slowdown in private-sector hiring growth. The S&P 500 (GSPC) rose by 0.19%, while the tech-heavy Nasdaq Composite (IXIC) climbed 0.20%. The Dow Jones Industrial Average (DJI) saw a smaller gain of 0.11%, holding just above the flatline. Despite the disappointing labor data, optimism for the broader market continued, helped by a strong start to the week for the major indices.
Stocks now aim for a third consecutive day of gains, though the ADP report has tempered expectations for further strength in the labor market. Investors are also keeping an eye on the latest developments in US-China trade talks, particularly as a steel tariff hike took effect on Wednesday.
Market Movers:
- Tesla (TSLA) -3.30%: Tesla slumped by more than 3% after a public clash between CEO Elon Musk and President Trump over the budget. The feud, which involves criticism of government spending, added to market concerns about the company's future outlook amid ongoing political tensions. Investors are closely watching how this public rift could impact Tesla's performance.
- Nvidia (NVDA) +0.07%: Nvidia saw slight gains on Wednesday, up 0.07%, continuing its impressive rally. The company recently surpassed Microsoft as the world’s most valuable company by market cap, hitting a $3.444 trillion valuation. This follows a more than 50% rise in May, and Nvidia’s upcoming presentation at the BofA Securities Global Technology Conference is expected to drive further momentum.
- Dollar Tree (DLTR) -0.50%: Shares dropped 0.5% after the company issued a warning about a significant hit to its second-quarter earnings due to tariffs. Despite beating first-quarter revenue and earnings estimates, the retailer’s forecast for adjusted profit to decline by 45%-50% in Q2 weighed on sentiment. However, Dollar Tree maintained its annual sales outlook, which helped cushion the decline.
- Constellation Energy (CEG) +1.55%: Constellation Energy continued to climb, gaining 1.55% after securing a significant 20-year nuclear power deal with Meta. The agreement, which will help support Meta’s expanding AI data centers, highlights Constellation's growing role in powering the tech sector with clean energy. Investors are optimistic about Constellation’s long-term growth prospects as clean energy demand increases.
ADP Jobs Report and Services Sector Concerns
The ADP National Employment Report revealed a sharp slowdown in private-sector hiring growth for May, with private payrolls increasing by just 37,000—well below the expected 114,000 and the smallest rise since March 2023. This miss raised concerns about the health of the labor market, especially as it comes amid ongoing trade uncertainties. Despite the soft jobs data, the market held steady, partly due to investors hoping the Federal Reserve would respond with rate cuts, a sentiment echoed by President Trump in his social media post criticizing Federal Reserve Chairman Jerome Powell.
The weakness in the ADP report was compounded by data from the Institute for Supply Management (ISM), which showed that the US services sector contracted for the first time since June 2024. The Services PMI registered 49.9 in May, a drop from April’s reading of 51.6, signaling slowing activity in key sectors like retail, health, and professional services. The decline was attributed to the uncertainty surrounding tariffs, which are pushing up costs and reducing business confidence.
US-China Trade Tensions and Steel Tariff Hike
The market is also keeping a close eye on U.S.-China trade negotiations, which have become increasingly tense. President Trump’s comments calling Chinese President Xi "extremely hard to make a deal with" have dampened optimism for a breakthrough in talks. The timing of the tariff hike on steel imports, which came into effect on Wednesday, adds another layer of uncertainty to the trade landscape. While the US and China have made some progress in trade discussions, issues such as chip exports, rare earth supplies, and Taiwan remain points of contention, creating further volatility for investors.
The escalating trade tensions have exacerbated concerns over the potential impact on global supply chains and economic growth. With the deadline for reciprocal tariffs set for July, investors are bracing for additional moves that could disrupt the market further.
Looking Ahead
Looking ahead, the market will continue to digest the economic data and trade developments, particularly the release of the May jobs report on Friday. Investors will be watching closely for any signs of labor market weakness or strength, which could influence the Federal Reserve’s next steps on interest rates. The ongoing trade tensions with China and the implementation of new tariffs will also remain a key focus, as these factors continue to weigh on investor sentiment.
With the labor market showing mixed signals and trade talks in a precarious position, the next few weeks could bring increased volatility as investors adjust their expectations for both the economy and corporate earnings. The outcome of these events, particularly the US-China trade discussions, will be pivotal in determining the direction of the markets in the coming months.