Stocks and Bonds Climb as US Economic Data Fuels Rate-Cut Hopes

Asian equities climbed alongside U.S. Treasuries on Wednesday after softer labor data from the United States strengthened expectations for a Federal Reserve rate cut, giving global markets a lift in sentiment.

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The MSCI Asia Pacific Index advanced 0.6%, with gainers outpacing losers by a two-to-one margin. Technology stocks initially slipped but later recovered, while futures tied to the Nasdaq 100 rose as much as 0.5%. Shares of Advanced Micro Devices Inc. surged 4.8% in after-hours U.S. trading following upbeat sales growth projections, signaling renewed optimism for the semiconductor sector. In contrast, SoftBank Corp. dropped 6% in Tokyo after selling its remaining stake in Nvidia Corp., the AI chipmaker whose shares have soared this year.

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Data from ADP Research indicated that the U.S. labor market cooled during the second half of October, prompting a rally in bonds across maturities. The 10-year Treasury yield fell four basis points to 4.08%, as traders increased bets that the Fed could start cutting rates as soon as next month. Futures markets now price in roughly a 70% chance of a December rate reduction. Meanwhile, the dollar stabilized after a five-day losing streak, and gold prices fluctuated as investors reassessed their positions.

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With the U.S. government shutdown leaving investors without official economic indicators, private data like ADP’s job report has taken on added importance. The record-length closure, however, could soon end after the Senate approved a temporary funding measure that lifted Wall Street’s mood. Investors now anticipate a flood of delayed reports once federal agencies resume operations.

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“As government functions return to normal, we’ll get a clearer sense of how resilient the economy truly is,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management. “Market sentiment is shifting as several supportive factors converge.”

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According to ADP’s latest weekly figures, U.S. companies cut an average of 11,250 jobs per week in the four weeks ended October 25. Its broader October report showed private-sector payrolls rising by 42,000, following declines in the previous two months suggesting a tentative rebound in hiring.

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Still, layoffs remain in focus. A separate report from Challenger, Gray & Christmas Inc. revealed that employers announced the most job cuts for any October in over twenty years, heightening concerns about the labor market’s momentum. “The market’s direction will likely be driven by risk sentiment and commentary from Fed officials,” wrote Westpac Banking Corp. strategists Damien McColough and Uma Choudhury. “However, it may struggle to maintain a clear trend until more consistent data emerges.”

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The next step toward reopening the U.S. government rests with the House of Representatives, which will reconvene to consider the funding bill. The proposal would keep most agencies operating through January 30 and extend funding for a few key departments until September 30. If approved, it heads to President Donald Trump, who has already voiced his support.

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The restart of official data releases could reinforce the case for rate cuts, giving traders additional confidence in their outlook. Economists surveyed by widely expect the Fed to lower its benchmark rate by a quarter percentage point during its December 9–10 meeting. However, the central bank’s path forward remains uncertain after Chair Jerome Powell cautioned last month that a cut isn’t guaranteed a view echoed by other Fed policymakers.

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Interestingly, corporate sentiment appears far less gloomy than it was in previous cycles. data shows that mentions of “economic slowdown” and related terms during earnings and guidance calls have fallen to their lowest levels since 2007. At the same time, the S&P 500 is on track for a third consecutive year of solid gains, with valuations approaching their post-pandemic highs.

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“Overall, the trend is still pointing upward,” said Louis Navellier of Navellier & Associates. “If the Fed moves ahead with a rate cut in December and adopts a more dovish tone, we could easily see new record highs before year-end.”

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In short, while concerns about labor market softness and fiscal disruptions persist, the broader market narrative remains one of cautious optimism. With the Fed potentially pivoting toward easing, investor confidence in both equities and bonds appears to be rebuilding setting the stage for a potentially strong finish to the year.

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