ADP NFP: Job losses are devastating, S&P 500 rally makes no sense

ADP reported an increase of 2.369 million private-sector jobs in June, below expectations while another S&P 500 rally, after staging the best quarter since 1998, seems unreasonable, according to FXStreet’s analyst Yohay Elam.

Key quotes

“ADP, America’s largest payroll provider, reported an increase of 2.369 million private-sector positions in the US in June. Expectations were closer to three million, so the actual number missed expectations. ADP also revised its figures for April, moving from a loss of 2.76 million to an increase of 3.065 million – an astonishing change of six million.”

“The bigger question is – will the US labor market continue its upward trajectory and complete a full recovery in the upcoming months? The answer is unfortunately negative. Employers do not hire so many workers in two months – these are furloughed or laid-off workers who have returned to their positions. The rapid bounce may be close to an end – with fewer ‘long-hanging fruits’ left. ”

“The S&P 500 Index enjoyed a robust recovery in the second quarter – the best since 1998. The gains have been fueled by the Federal Reserve’s $3 trillion increase in its balance sheet and also some hope for a recovery. That may already be in the price after that impressive Q2 – and could have already reached unsustainable levels. Will stocks fall now? That may have to wait for the official Nonfarm Payrolls, or perhaps later on when data from the latter half of June comes out.”