Closing: U.S. stocks rise with Dow up over 300 points as ADP employment data strengthens the case for Fed rate cuts

In the early hours of September 5th, Eastern Time, U.S. stocks maintained their gains in late trading on Thursday. A weak ADP private employment report led investors to believe that the Federal Reserve has reason to cut interest rates in September. The market is awaiting the release of the August non-farm payroll data on Friday.

The Dow Jones rose 303.86 points, or 0.67%, to 45,575.09 points; the Nasdaq gained 147.58 points, or 0.69%, to 21,645.31 points; and the S&P 500 index increased by 38.92 points, or 0.60%, to 6,487.18 points.

Amazon shares rose 3.9% after Barclays stated that if Amazon can maintain its partnership with AI startup Anthropic, its AWS business could see a reacceleration of growth in the fourth quarter.

The ADP private employment report released Thursday morning showed an increase of 54,000 jobs in August. Economists surveyed by Dow Jones had previously expected private employers to add 75,000 jobs. This figure is also lower than the revised 106,000 in July. The report indicates a sharp slowdown in the momentum of U.S. labor force growth.

However, U.S. stocks continued to rise, as investors believe the recent weakness in ADP data is sufficient for the Federal Reserve to have a reason to cut interest rates in September, but not weak enough to signal a recession.

According to CME Group's FedWatch tool, traders have increased their bets on a rate cut by the central bank on September 17, with federal funds contracts rising after the ADP report was released.

Jamie Cox, managing partner at Harris Financial Group, said: "The Federal Reserve's free pass on the labor market has ended. The ADP data continues to reinforce the narrative that the positive change rate in the labor market has slowed significantly, so it can be expected that the Fed will adjust the risk balance and cut rates in September."

In addition, the unemployment claims report for the week ending August 30 released on Thursday provided more evidence of a slowdown in the labor market. The number of initial jobless claims in the U.S. rose to 237,000 last week, exceeding expectations and increasing by 8,000 from the previous week.

Meanwhile, the August ISM Non-Manufacturing PMI reading was 52.0, slightly better than the Dow Jones estimate of 50.8.

After the release of these reports, a major employment report will be released on Friday. According to economists surveyed by Dow Jones, non-farm payrolls are expected to increase by 75,000 last month.

Traders are also turning their attention to Washington to focus on the latest developments in trade, after Trump requested the Supreme Court to quickly rule on an appeal to overturn a lower court's decision that deemed most of Trump's tariffs illegal.

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