Good morning, investors. It’s Friday eve and stocks are right below record highs.

That might sound like an unusual stat to highlight given that we just got word that the labor market is under more pressure than expected, but it’s another detail in the ongoing narrative of the bifurcated economy.

Markets are back in the familiar territory of bad news in the economy translating to good news for asset prices.

Stocks climbed Wednesday following a downbeat update on the labor market from payrolls processor ADP, which reported private companies cut 32,000 in November.

Not only did that fall well short of expectations for a gain of 40,000, it marked the sharpest decline since March 2023.

“While November’s slowdown was broad-based, it was led by a pullback among small businesses,” said ADP chief economist Nela Richardson.

Wednesday delivered the K-shaped economy in a single trading session — negative news on jobs was positive for investors and asset allocators.

The data pushed stocks higher because, at this point, any sign of deterioration in the labor market raises the odds for a rate cut from the Federal Reserve.

As of Wednesday, traders assigned an 89% likelihood for a 25-basis-point cut on December 10, according to CME data.

That’s up from 83% one week ago and 66% one month ago.

Commerce Secretary Howard Lutnick pointed to the government shutdown as reason for lower-than-expected ADP numbers, shrugging off the notion it was tariff-driven.

“What do you think happens to small business [during a shutdown]?” Lutnick said in an interview on CNBC Wednesday.

“The people who do business with the US government, they know they’re not getting paid, so they sort of slow down their projects.”

At any rate, the weakening private payrolls data lines up with trends elsewhere, too.

While the next establishment jobs report is due December 16 — a delayed date due to the government shutdown — it’s expected to reflect more of the same softening it’s shown all year.

In recent months, central bankers have diverged into two camps, split between which side of their dual mandate to prioritize — inflation or employment.

Based on the market reaction, the latest jobs data appears likely to convince some of the more hawkish members of the Fed to lean into a rate cut.

🏦 The Fed Chair still only gets one vote on a board. That’s what Treasury Secretary Scott Bessent said Wednesday at the DealBook Summit: “[There are] several other votes from the regional banks…to move and start the discussion, but at the end of the day...he or she is one vote.” (CNBC)

🤝American Eagle stock soared 13% Wednesday. The retailer has seen a massive boost in business and its stock price after its viral Sydney Sweeney ad campaign. It raised its sales guidance to a 9% increase for the fourth-quarter. (WSJ)

💵 Dollar Tree beat earnings expectations. The stock ticked higher as the company reported one of its strongest quarters in years, signaling a flight to value for consumers and a broad desire for budget goods. (Quartz)

📨 What’s driving the next era of global business? Join top execs at banks, advisory firms and hedge funds reading Semafor Business, a twice-weekly briefing authored by Liz Hoffman, a veteran journalist and friend of Opening Bell Daily. Sign up here.

🗓December 4, 2008: The Fed’s dollar liquidity swap lines with foreign central banks reached their maximum usage of $586 billion, highlighting just how strained global dollar funding had become at the height of the financial crisis.

📰 I’m Phil Rosen, co-founder of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter and host our show, Full Signal, to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

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