The ADP data for June is quite shocking, with a recorded decrease of -33,000, indicating that private sector employment not only failed to grow but actually saw a net decline.
ADP's negative values are usually a precursor to weakness in non-farm employment. If Thursday's non-farm employment report also significantly underperforms expectations, market confidence in a soft landing for the economy will begin to collapse. This should typically be a sign of recession, so why did the market rise?
Because the market has shifted its bets towards a hard landing for the economy + rapid interest rate cuts + expectations for a new round of quantitative easing. If this is indeed the path we are taking, it suggests that the forthcoming interest rate cuts may not be a good thing; they could shift from normal cuts due to reduced inflation to defensive cuts aimed at preventing economic recession.
Of course, there have been many instances where ADP data and non-farm data were completely different, so the specific non-farm data still needs to be seen from Thursday's release. The current market is a typical case of bad data being viewed as good data expectations.