Stocks bounced back Wednesday, reclaiming ground lost during Tuesday’s profit-taking. The S&P 500 rose 0.4%, the Nasdaq gained 0.7%, and the Dow added 0.5%, helped by solid labor and services data that eased fears of a deeper pullback.

The October ADP report showed private payrolls increasing by 42,000, above expectations and breaking a two-month streak of declines, while the ISM Services PMI climbed to an eight-month high of 52.4.

Both pointed to a steady service economy even as overall growth cools. The one blemish: the ISM prices-paid index surged to 70.0, its highest since 2022, signaling that inflation may not be fully tamed. Treasury yields climbed modestly, with the 10-year ending near 4.15%.

Breadth was strong, with advancers outpacing decliners nearly two-to-one and small caps leading. Energy, Technology, and Communications topped sector gains, while Consumer Staples and Real Estate lagged.

Earnings continue to support the backdrop: of 383 S&P 500 companies to report, 85% have beaten EPS estimates by an average of 21%.

Aggregate earnings growth stands at 18%, and while valuations remain stretched, the S&P 500 trades at a 42% premium to its 25-year average forward P/E, the expansion is broad-based across sectors, not just concentrated in tech.

Gold rose 0.8% to $3,992 an ounce as investors sought hedges against political and valuation uncertainty, while oil fell 1.6% to $59.60 after a surprise inventory build.

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Futures were steady overnight following Wednesday’s rebound, pointing to a cautiously constructive tone ahead of new data. The ADP report’s upside surprise gave traders their first clean read on labor conditions during the government shutdown, which has now entered day 37.

A new Challenger, Gray & Christmas report showed that announced job cuts surged 183% in October to 153,074, the highest level for the month in 22 years and the worst year for layoffs since 2009. Technology led with 33,000 cuts, nearly six times September’s pace, as companies recalibrate staffing around AI integration.

While the data can be volatile, it lands at an uneasy time: official labor releases remain suspended under the government shutdown, leaving private surveys like ADP (+42,000 jobs in October) to carry the narrative.

The focus today shifts to the Supreme Court’s ongoing tariff hearing.. The Court’s interpretation of presidential trade authority under the International Emergency Economic Powers Act remains the week’s biggest policy wildcard.

Overseas, European stocks were higher after better-than-expected PMI readings in the eurozone and the U.K., while Asian markets ended mixed following Beijing’s guidance that new data centers receiving state support must use Chinese-made AI chips, a move reinforcing the country’s self-sufficiency drive in strategic technologies.

Heading into the final stretch of earnings season, most desks are looking for confirmation rather than catalysts, evidence that the economy is holding steady, the Fed remains patient, and investors can safely rotate back into risk without fear of catching a falling knife.

Central banks are entering a holding pattern as fiscal and data uncertainty deepen. Federal Reserve officials remain divided, with December rate-cut odds drifting near two-thirds from over 90% last week. Yields near 4.1% and a firmer dollar reflect the market’s recalibration toward a slower policy pivot.

In Europe, ECB President Christine Lagarde reiterated that inflation remains “persistent” even as growth slows, suggesting policymakers are wary of signaling premature easing.

The Bank of England kept its policy rate unchanged at 4% in a split vote that leaned dovish, with two members favoring an immediate cut. The tone of the statement suggested easing could come as soon as next month, as policymakers cited softening inflation data and weakening domestic demand.

The Reserve Bank of Australia echoed that tone earlier in the week, holding its rate at 3.60% and emphasizing patience. The message across major central banks is consistent: the rate-cut cycle is on pause until clarity returns.

Trade tensions remain a quiet but persistent undercurrent in global markets. The Supreme Court’s review of Trump’s tariff authority under the International Emergency Economic Powers Act could reshape U.S. trade policy if the justices narrow the scope of executive powers.

Treasury officials have warned that a ruling against the administration could trigger as much as $195 billion in tariff refunds and complicate future negotiations with China and the EU.

In Asia, Beijing’s new directive requiring all state-subsidized data centers to use Chinese-made AI chips has sent ripples through semiconductor supply chains, weighing on U.S. exporters and reinforcing China’s push for technological self-reliance.

The policy underscores how industrial strategy has become the central lever of competition between the world’s two largest economies.

Meanwhile, Venezuela is reemerging on the geopolitical radar. Reports suggest U.S. officials are weighing a partial reinstatement of oil sanctions following President Maduro’s refusal to guarantee election oversight. The move would reverse some of the Biden administration’s 2023 concessions and tighten global heavy crude supply just as prices drift near $60 a barrel.

European refiners are already exploring alternative sourcing options from West Africa and the Gulf, signaling that energy diplomacy may again become a flashpoint in broader trade negotiations.

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The government shutdown is beginning to ripple through the economy. The FAA said it will reduce air traffic by 10% at 40 major airports starting Friday as air-traffic controllers continue to work unpaid. The decision marks the first operational impact on consumers, raising pressure on Congress to act.

Reports suggest roughly a dozen Democratic lawmakers are considering a deal with Republicans that would fund several agencies for a full year and reopen others temporarily in exchange for a Senate vote on expanding Affordable Care Act subsidies.

That proposal could clear the 60-vote hurdle, but progressive factions argue that Tuesday’s strong election results, where Democrats won two governorships, justify holding out for more concessions.

The political calculus is shifting: what began as a test of resolve is quickly becoming a test of endurance.

COP, PH, VST, ABNB, MNST, EOG, CMI, APD, BDX, DDOG, DISCA, TTWO, ROK, NRG, MCHP

Asia: Nikkei +1.34%, Shanghai +0.97%
Europe: FTSE -0.28%, DAX -0.13%

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Markets enter Thursday on firmer footing after shaking off Tuesday’s jitters. Strong service and jobs data helped re-anchor sentiment and keep equities aligned with their broader uptrend.

While the backdrop remains dominated by the government shutdown and tariff uncertainty, investor psychology appears to have turned from fear toward focus. After weeks of volatility, the market feels less like it’s bracing for impact and more like it’s preparing for direction.