Equity markets rebounded Wednesday after the ADP report came in weaker than expected. The takeaway is that bad news is now good news and puts the market in a precarious position. Bad news suggests a weakening labor market that will undermine consumer spending, economic activity, S&P 500 earnings, and inflation. In this scenario, the cure for the illness may be worse than the disease.

The next big hurdle for the market is on Friday. The NFP report is due out and may confirm the ADP weakness. The caveat is that the 2 labor market data do not track in alignment on a month-to-month basis, and the NFP could paint a far different picture. Regardless, the key point in the NFP report will be the wage inflation data. If wages continue to run hot, it may not matter how many jobs are created.