Stocks drop ahead of NFP, the new ADP, China weakens, Oh Snap, bitcoin fights to hold $20k

US stocks are weakening ahead of a key labor market report that should pave the way for further aggressive rate hikes by the Fed.

US Data

So it begins. The labor market is cooling as private payrolls clearly showed a more conservative pace of hiring. ​ ADP’s new methodology was in place and showed job growth slowed for a second-consecutive month as companies added the fewest jobs since early 2021. ​ ​ After taking a month, the ADP report showed the change in US private employment rose by 132,000, which was down from the prior month when the economy created nearly 270,000 jobs.

Expectations are still mostly optimistic for Friday’s nonfarm payroll report, which is expected to see 300,000 jobs created in August. ​ The consensus range for the headline NFP result is between 75,000 and 452,000 jobs. ​ The unemployment rate is expected to remain steady at 3.5%, which will be closely watched by the Fed as they are expecting it to start to rise significantly over the coming months.

A slower pace of hiring still gives the Fed the greenlight for more aggressive rate hikes over the next couple of FOMC meetings. ​

China

China’s PMI data confirms the economy is weakening quickly as the impact from COVID lockdowns, intense heat waves, a troubling property crisis, and the global energy crisis lingers. The official manufacturing purchasing manager’s index increased from 49.0 to 49.4, a slight beat of the 49.2 consensus estimate. ​ Factory activity remains in contraction territory and might struggle to recapture the 50-point mark next month.

The PBOC will need to do more to revive growth, but they will resist aggressive easing. ​ They might also allow the yuan to depreciate a little more.

Snap

Snap shares are rising after announcing a major restructuring. ​ Snap Inc will cut about 20% of its workforce and discontinue many investments as they try to save $500 million annually. ​ Snap’s struggles might become a similar story that gets told across corporate America.

Bitcoin

Bitcoin is hovering around the $20,000 level despite global stock market weakness. ​ The next major move for bitcoin will likely come after the nonfarm payroll report, which could show signs of cooling and prompt a short-term relief rally. ​

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