This Is Much More Than Your Usual Fed Day

The last two days have been a bit of a preamble for Wednesday’s events that begin with the release of ADP’s July Employment Report before the market open, followed by the Fed’s policy decision and Chair Powell's press conference this afternoon, and conclude with quarterly results after the close from Microsoft MSFT and Meta META. Those two reports are the first half of the big back-to-back days of earnings for key S&P 500 constituents. The second half comes after Thursday night’s close with results from Apple AAPL and Amazon AMZN.

Because we are in the thick of second-quarter earnings season, there will be a plethora of those reports and updated guidance as well. We could see the market gyrate a little bit as investors grapple with what is revealed over the course of the day and what it means for the economy, interest-rate prospects, and earnings expectations.

We’ll calmly take one at a time, letting them "talk to us," and share our insights with you, and any necessary changes to our thinking about the market, economy, and, of course, the Pro Portfolio’s holdings.

With that setup out of the way, let’s begin with ADP’s July Employment Report and then, in subsequent Alerts, review relevant data points from a handful of companies that reported last night and early this morning.

ADP’s July Employment Report

The market expected a big rebound in July job creation, with the consensus view for ADP’s July Employment Change report to add 77,000 jobs vs. the 33,000 lost in June. Well, the market underestimated that strength, as ADP found 104,000 jobs were added in July, and the number of job losses in June was revised lower to 23,000. Gains were posted in all of ADP’s categories except for Education and Health Services, which lost 38,000 jobs.

Notable sectors of job creation included construction (15,000), trade, transportation & utilities (18,000), and financial activities (28,000). Breaking it down one step further, 31,000 goods-producing jobs and 74,000 service-providing jobs were added during the month. In terms of wage gains, job stayers saw a 4.4% increase year over year, while job changers saw a 7.0% gain. And we’d note both of those figures have been relatively constant over the last few months.

We see the ADP report supporting the job creation found in the Flash July PMI report, giving the Fed another reason to keep interest rates at current levels exiting today’s meeting. The implication for the economy is positive, and that in turn gives the Fed additional wiggle room and waiting time to gauge the impact of tariffs on inflation pressures. The July Flash PMI report showed that impact, but we’ll look for confirmation in ISM’s July Manufacturing PMI report later this week and its Service PMI out next week.