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GDP and private payrolls — What you need to know in markets on Wednesday

Myles Udland
Markets Reporter

A major theme in the stock market this year has been the lack of volatility.

And this theme’s close cousin has been that when there does seem to be something to be nervous about, markets learn to fade this action pretty quickly. Tuesday, we saw this play out once again.

On Monday evening, headlines crossed that North Korea had fired a missile that crossed over northern Japan, once again igniting fears of a looming confrontation between the U.S. and North Korea. When New York investors came to the office Tuesday morning, Dow futures were off about 120 points, but after opening in the red stocks began a quick reversal higher.

When all was said and done, the major averages each closed in the green.

Stocks ultimately ended the day higher after some early worries about North Korea sent markets lower at the open. (Source: Yahoo Finance)

On Wednesday, markets will have a couple of pieces bigger pieces of economic data to contend with, barring any headlines coming out overnight.

In the morning, we’ll get the first of three days of U.S. labor market data as data processing firm ADP will release its August report on private payroll growth in the morning.

The second estimate of second quarter GDP from the government is also slated for release in the morning, and should show an improvement in the rate of the growth in the year’s second three-month block to 2.7% from 2.6%.

Markets will also continue to monitor the situation in southeastern Texas, where historic rainfall from Hurricane Harvey continues to impact the region. Yahoo Finance’s Nicole Sinclair rounded up what a few Wall Street economists are saying the economic impacts could be from the storm, though at this point all forecasts are too preliminary to be made with any real confidence.

HOUSTON, TX – AUGUST 29: Rescue workers and volunteers help residents make their way out of a flooded neighborhood after it was inundated with rain water following Hurricane Harvey on August 29, 2017 in Houston, Texas. Harvey, which made landfall north of Corpus Christi August 25, has dumped nearly 50 inches of rain in and around areas Houston. (Photo by Scott Olson/Getty Images)

Consumers remain historically confident in the labor market

U.S. consumers are still feeling great.

Readings of business and consumer confidence spiked after the election. But some expected that by now we’d need to either see some follow-through on policies the Trump administration pledged to pursue or else we’d see waning confidence from both the consumer and business class.

Data from The Conference Board released Tuesday, however, indicates that consumers are still feeling about as good about the economy, and in particular the labor market, as they have in over a decade.

In Tuesday’s report, the number of consumers who indicated that jobs are “plentiful” in the economy hit 35.4%, the highest since July 2001 and a reading only surpassed twice — just before the post dot-com bubble recession and back in the late 1960s.

The team at Bespoke Investment Group looked a bit closer at this data on Tuesday, and found that not only is overall confidence in the economy and the labor market strong, but that the rate at which consumers’ assessment of the job market has improved in the last six months paints an event stronger picture.

“From a level of just 26.9% in February, [the jobs plentiful] index has increased by 8.5 percentage points in the last six months, which is a rate of change that is uncommon,” Bespoke wrote in a note on Tuesday.

“In fact, there have only been five other periods since 1968 where this component saw a similar rate of increase (7.5 points) or more with the last peak occurring in April 2006.”

Consumers’ assessment of the labor market has improved markedly in the last six months. (Source: Bespoke Investment Group)

Bespoke added that in their work they looked at whether these spikes in employment optimism, which is considered a backward-looking economic indicator, presaged downturns in the S&P 500. Results over the three months pointed to a flat market, but over the twelve months, stocks were higher following each of the five occurrences.

Commenting more broadly on Tuesday’s data, which also showed that overall confidence hit its second-highest reading since 2001, Michael Pearce at Capital Economics said, “In all, the resilience of consumer confidence this year in the face of  the turmoil in the  White House, the growing threat of nuclear war, and demonstrations on the streets is testament to how much economic conditions have improved in recent years.”

“Against that backdrop,” Pearce added, “there is every reason to expect consumption growth to remain relatively rapid in the coming months and quarters.”

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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