On the Rebound. Markets bounced back on Wednesday following a three-day losing streak, as they shook off rising yields and higher oil prices.

The Dow Jones Industrial Average closed up 0.6%, or 294 points. The Nasdaq Composite and the S&P 500 both gained 0.5%.

Wednesday’s rebound doesn’t have any real “fundamental justification,” says José Torres, senior economist at Interactive Brokers. “Rather, it’s likely that bulls just got tired of losing for three consecutive sessions, and investors were looking for a reason to buy the dip.”

The 10-year Treasury note’s yields leveled out at 4.792% on Wednesday after surging past their January 2025 peak of 4.808% overnight. New York Fed President John Williams said that high yields were driven more by stronger economic growth, were and not due to market dysfunction.

The day wasn’t entirely without news, though. Nvidia performed well, and CEO Jensen Huang spoke at the G20 summit Wednesday. Beyond the latest ADP private payroll data (more on that below), the Federal Reserve released the latest edition of the Beige Book.

It showed that economic momentum narrowed slightly, with 1o of the 12 regional bank districts reporting growth in August compared to 11 in July. And hiring appears to have risen ever so slightly last month, with the pace of price growth stabilizing a bit.

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The August employment data released so far is proving a bit weaker than expected, potentially complicating the Fed’s interest rate decision later this month.

The U.S. added just 38,000 jobs to private payrolls last month, according to Wednesday’s ADP National Employment Report. That’s a bit softer than economists expected, and a pullback from the 46,000 positions added in July.

Inflation will likely remain the driver behind the September rate decision, but investors shouldn’t dismiss the possibility that the latest raft of employment data could shift expectations. Traders are pricing in 64% odds of a rate hike as of Wednesday, according to the CME FedWatch tool. That could change if the upcoming jobs report on Friday revives fears that labor conditions are not strong enough to handle higher interest rates.

Economists surveyed by FactSet expect employers to have added 65,000 jobs in August. The national unemployment rate is projected to rise to 4.2% from July’s 4.1%. But there’s a wide disparity among the payroll estimates, with forecasts ranging from a decline of 25,000 from Fifth Third Bank’s Bill Adams to a gain of 121,000 from Regions Bank.

The key question is whether the latest jobs data will contradict Warsh’s assessment that the U.S. labor market is doing well. “Labor markets are quite stable,” Warsh said last week, signaling that employment conditions could withstand higher interest rates if need be.

Other employment data raises questions about how true that really is. Vanguard’s data showed released on Tuesday showed net new hires were down in August, especially among companies with fewer than 250 employees. Payroll processor Gusto also found that small-business hiring slipped below the 12-month average in August. And the Institute for Supply Management found that employment in the manufacturing sector, which had ticked up last month, fell by 1.6 percentage points to 51.2 in August.

“The spring upturn in payrolls is firmly in the rear-view mirror,” writes Oliver Allen, senior U.S. economist for Pantheon Macroeconomics.

Campbell’s, Ciena, Docusign, Guidewire Software, Lululemon Athletica, Planet Labs, Samsara, UiPath, Victoria’s Secret, and Zscaler announce quarterly results tomorrow.

The Institute for Supply Management releases its Services PMI for August. Economists forecast a 54.1 reading, which would match the July figure.

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