Stocks get boost from stronger-than-expected private sector jobs, AI trade still struggles

[Skyline of Lower Manhattan]
Art Wager

Wall Street's major averages saw some relief after the private sector employment staged a rebound in October, while AI stocks continued to be under pressure, and the U.S. government shutdown carries on as the longest ever.

The benchmark S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) was last +0.6% in midday trade, while the Nasdaq Composite (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]) was +0.9%, and the Dow (DJI [https://seekingalpha.com/symbol/DJI]) seesawed, and was last +0.2%.

October U.S. private sector employment bounced [https://seekingalpha.com/news/4515648-private-sector-employment-stages-rebound-in-october-adp-jobs-report] up by a stronger-than-expected 42K in October, erasing a 32K decline in September, according to data released by ADP on Wednesday.

The U.S. ISM Services Index also rose more than expected [https://seekingalpha.com/news/4515793-october-ism-service-pmi-advances-more-than-expected-as-new-orders-accelerate], with new orders accelerating. The S&P Global U.S. Composite PMI, however, slightly trailed [https://seekingalpha.com/news/4515779-us-pmi-composite-rises-slightly-less-than-expected-in-october] consensus estimates.

On the AI trade, tech stocks have continued to struggle to stay afloat. Palantir (PLTR [https://seekingalpha.com/symbol/PLTR]) -2.6% has continued to be in the negative, even after [https://seekingalpha.com/news/4514018-palantir-stock-tumbles-despite-q3-beat-as-analysts-mull-valuation#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews] the enterprise software giant reported third-quarter results [https://seekingalpha.com/news/4513250-palantir-pops-as-it-boosts-full-year-guidance-on-back-of-strong-q3-results#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews] and raised its full-year guidance.

Also, Super Micro Computers (SMCI [https://seekingalpha.com/symbol/SMCI]) tumbled [https://seekingalpha.com/news/4515855-smci-sinks-despite-robust-fiscal-2026-outlook-as-analysts-point-to-shrinking-margins] -8.5% after an $800M Q1 revenue miss, although Q2 revenue outlook crushed estimate by $2B; and Arista Networks (ANET [https://seekingalpha.com/symbol/ANET]) fell -6.8% following its third quarter results and outlook, with concerns over slowing growth.

“We would characterize the recent pullback in tech as a brief breather, since earnings are crushing it and growing faster than revenues and that often leads to multiple expansion. The combination of strong earnings and a Federal Reserve in full-on dove mode along with trillions of dollars in cash on the sidelines suggest that after this breather passes, we're likely to set record highs by New Year’s Eve,” said Robert Edwards, CIO at Edwards Asset Management.

“Big tech’s still got gas left in the tank, but the baton is ready to be passed to the well-rested and cheap: consumer staples, healthcare, and mid/small-cap underdogs are lacing up to broaden the rally over the coming 12-18 months - and no one is looking at them. We are on the precipice of a noticeable rotation in the market,” Edwards added.

Over in the bond market, the 10-year Treasury yield (US10Y [https://seekingalpha.com/symbol/US10Y]) rose 7 basis points to 4.16%, while the 2-year yield (US2Y [https://seekingalpha.com/symbol/US2Y]) rose 5 basis point to 3.64%.

In addition, the U.S. government shutdown is now in its 36th day -- the longest in American history -- with odds pointing it could end this week [https://seekingalpha.com/news/4515439-government-shutdown-becomes-longest-ever-odds-say-the-end-is-near].

Bitcoin (BTC-USD [https://seekingalpha.com/symbol/BTC-USD]) has sunk about 20% [https://seekingalpha.com/news/4515397-bitcoin-bear-market-ether-erases-ytd-gains] from a record high that it hit a month ago, pushing the top cryptocurrency into bear market territory.

More on the earnings side, QUALCOMM (QCOM [https://seekingalpha.com/symbol/QCOM]), Energy Transfer LP (ET [https://seekingalpha.com/symbol/ET]), and Lucid (LCID [https://seekingalpha.com/symbol/LCID]) among others, will release their results on Wednesday.

Wall Street's major averages fell on Tuesday, with the Nasdaq shedding the most as AI-related stocks closed in the red despite some positive earnings.

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