U.S. Treasury yields tumbled Wednesday in response to a report that private sector job creation in May was the weakest in more than two years, prompting President Donald Trump to urge the Federal Reserve to lower interest rates, and as 50% steel tariffs went into effect.
The 2-year yield dropped more than 9 basis points to 3.866%, while the 10-year Treasury yield fell more than 10 basis points to 4.357%. The 30-year long bond yield also sank more than 10 basis points to 4.881%.
Stream NBC4 newscasts for free right here, right now.
WATCH HEREOne basis point equals 0.01% or 1/100th of a percent, and yields and prices move inversely in the bond market, meaning prices are sharply higher Wednesday.
Payrolls processing firm ADP said Wednesday that private sector job creation slowed to a near standstill in May, signaling a weakening labor market. Payrolls increased just 37,000 for the month, below the downwardly revised 60,000 in April and the Dow Jones forecast for 110,000. It was the lowest monthly job total from the ADP count since March 2023.
We have the news you need to know to start your day. Sign up for the First & 4Most morning newsletter — delivered to your inbox daily.
SIGN UP The report comes two days before the more closely watched nonfarm payrolls count from the Bureau of Labor Statistics, which is expected to show a gain of 125,000 and the unemployment rate steady at 4.2%.
In reaction to the ADP number, Trump angrily urged Federal Reserve Chair Jerome Powell to cut interest rates. Trump met Powell at the White House last week to discuss the economy, but readouts from both sides suggest the private meeting turned confrontational.
"The Fed will take notice of slower job growth, but this won't be enough to convince them to cut interest rates near term," said Bill Adams, chief economist for Comerica Bank. "Labor force growth will also be slower in 2025 due to less immigration, so less job growth is needed to hold the unemployment rate steady."
Money Report
Investor fears around slowing economic growth were also heightened Wednesday after new U.S. services data showed the sector weakening. May's ISM services index reading fell to 49.9% for the month, below the expansion/contraction line and lower than the Dow Jones consensus estimate of 52.1%. The survey also noted declines in new orders, production, inventories and order backlogs.
At the same time, U.S. tariffs on imported steel and aluminum doubled to 50% effective Wednesday, threatening to slow activity and raise prices on everything from oil drilling equipment to beer and soda cans. The president has claimed steeper duties will "further secure the steel industry."
Investors also reacted to languishing trade talks between the U.S. and China, the world's two largest economies. Trump on Wednesday said it is "extremely hard" to make a deal with China's President Xi Jinping, and China's foreign minister called on the U.S. to "meet China halfway." A senior White House official told CNBC earlier this week that Trump and Xi are set to speak this week.
— Additional reporting by CNBC's Jeff Cox, Anniek Bao, Evelyn Cheng and Kevin Breuninger.
