Instant Analysis: GDP and ADP employment exceed market expectations

Scott Anderson
Posted by Scott Anderson
Chief Economist

Stronger-than-expected second quarter GDP revisions and a robust ADP employment report for August bolstered stocks and the U.S. dollar today, while Treasury bonds sold off.

Small group of colleagues looking at a strategy document as seen through a glass window with a hint of urban reflectionSecond quarter GDP was revised up 0.5 percentage points to 3.0% as real consumer spending was revised up to a rock-solid 3.3% growth rate. There were upward revisions to business equipment and structural investment as well today. This sets us up for a strong Q3 GDP print driven by more consumer spending gains.

ADP employment jumped a stronger-than-expected 237K jobs in August, far outdistancing the consensus forecast. Last month’s reading was revised higher to 201K. This raises the odds that nonfarm payroll gains for the month of August, released on Friday, could also surpass economists’ forecasts.

Treasury yields increased across the board today with the 10-Year Treasury yield increasing a modest 0.3 basis points to 2.133% from 1.129% yesterday. The 2-10 Treasury spread narrowed to 80.2, down 0.8 basis points from yesterday. The futures market probability of a fed funds rate hike by December 2017 increased to 33.2% from 29.8% yesterday.

The S&P 500 increased for the fourth straight day, gaining 0.46% while the NASDAQ jumped 1.05% on rising U.S. economic optimism. Stocks have been shaking off lingering fears about the situation in North Korea.

The U.S. dollar gained against most major currencies, rising from a two-year low, with the Bloomberg dollar spot index climbing 0.39% from yesterday.

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