Wall Street Wavers as Soft Jobs Data Lifts Rate-Cut Bets and AI Trade Drives Stock Moves

Key Moments

Equity Indexes Split as Labor Data Shifts Rate Outlook

U.S. equities moved in different directions on Wednesday.
Investors weighed weaker private employment data, shifting Fed expectations, and new developments in the tech sector.

At 09:45 ET (14:45 GMT), the Dow Jones Industrial Average was up 75 points, or 0.2%. The S&P 500 index was down 5 points, or 0.1%, while the NASDAQ Composite declined 97 points, or 0.4%.

Soft ADP Payrolls Reinforce Expectations for December Fed Cut

The ADP National Employment Report showed that private-sector employment contracted in November. Private payrolls fell by 32,000. Previously, October payrolls were revised up to a 47,000 increase. Economists had expected a 5,000 job gain, so the miss was significant.

Nela Richardson, Chief Economist at ADP, said in a statement: “Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment. And while November’s slowdown was broad-based, it was led by a pullback among small businesses.”

This downside surprise highlighted growing worries about a cooling labor market. It also strengthened expectations that the Federal Reserve will cut interest rates later this month.

According to CME FedWatch, the probability that the U.S. central bank will cut its benchmark rate by 25 basis points at the conclusion of its December 9-10 meeting has climbed to nearly 90%. The elevated odds suggest broad market conviction that policymakers will feel able to support a weakening jobs backdrop even as inflation pressures are described as sticky.

Market participants will receive additional guidance on the inflation and consumer backdrop on Friday, when the delayed Personal Consumption Expenditures Price Index – the Fed’s preferred inflation barometer – is released alongside personal income and spending figures. The PCE data is also expected to shape views on how aggressive and how fast any future rate reductions might be.

Microsoft Faces AI Monetization Hurdles

In corporate news, Microsoft (NASDAQ:MSFT) traded lower after a report from The Information indicated the company is encountering challenges in driving revenue growth from some of its newer artificial intelligence offerings.

According to the report, Microsoft has reduced sales quotas for AI software products as customers have shown reluctance to adopt certain newer tools. The article said the company has trimmed expectations for the pace at which it can generate income from its AI “agents,” which are designed to automate tasks involving multiple steps.

The Information reported that several business units within Microsoft have cut sales growth targets for selected AI products after many members of the sales force failed to hit their targets in the fiscal year that ended in June. This recalibration was described as atypical for the company, pointing to unexpected headwinds in persuading clients to increase AI-related spending.

Marvell’s Celestial AI Deal Targets Photonics and Compute Expansion

Elsewhere in the technology space, Marvell Technology (NASDAQ:MRVL) rallied after confirming that it had agreed to acquire semiconductor startup Celestial AI in a multi-billion transaction. The deal is aimed at bolstering Marvell’s compute capabilities amid elevated demand tied to the artificial intelligence upcycle.

The $3.25 billion agreement will give Marvell control of Celestial’s developments in photonics, a technology that uses light rather than electrical signals to connect AI processors with memory chips. The company expects the acquisition to begin contributing meaningfully to its revenue in the second half of its fiscal 2028.

Risk Sentiment Influenced by Tesla and Crypto Rebound

Tesla (NASDAQ:TSLA) edged higher after reports that the Trump administration is looking to speed up development of the robotics industry, a move that could support firms involved in automation.

Broader appetite for risk assets also improved alongside a recovery in digital currencies. Bitcoin moved back above the mid-$90,000 range following sharp declines earlier in the week. The rebound supported crypto-related equities and helped underpin a more positive tone across segments of the market sensitive to risk sentiment.

Oil Prices Climb as Ukraine Peace Prospects Dim

Crude futures advanced as the likelihood of an imminent resolution to the war in Ukraine appeared low, keeping supply risks in focus.

Brent futures rose 1% to $63.06 per barrel, while U.S. West Texas Intermediate crude futures gained 1.1% to $59.31 per barrel.

Russia and the U.S. failed to reach agreement on a possible Ukraine peace arrangement after a prolonged meeting late Tuesday between Russia President Vladimir Putin and U.S. envoys Steve Witkoff and Jared Kushner.

Oil traders are watching the diplomatic efforts closely to assess whether any eventual deal might trigger the removal of sanctions on Russian entities and release constrained oil supplies into the market.

At the same time, rising U.S. inventories added to concerns about a potential oversupply. The American Petroleum Institute reported on Tuesday that U.S. crude stockpiles increased by 2.48 million barrels in the week ended November 28.

The market is now awaiting official figures from the U.S. Energy Information Administration, which is scheduled to publish its government inventory report later on Wednesday.