U.S. Stocks Move Higher As Jobs Data Adds To Rate Cut Optimism

(RTTNews) - After showing a lack of direction early in the session, stocks moved mostly higher over the course of the trading day on Wednesday. While the Nasdaq and the S&P 500 posted modest gains, the narrower Dow showed a more notable move to the upside.

The major averages all finished the day in positive territory. The Dow jumped 408.44 points or 0.9 percent to 47,882.90, the Nasdaq rose 40.42 points or 0.2 percent to 23,454.09 and the S&P 500 climbed 20.35 points or 0.3 percent to 6,849.72.

The advanced by the Dow came as shares of UnitedHealth (UNH) spiked by 4.7 percent, while Goldman Sachs (GS), McDonald's (MCD) and Amgen (AMGN) also posted strong gains.

On the other hand, shares of Microsoft (MSFT) slumped by 2.5 percent after a report from The Information said the software giant lowered growth targets for artificial intelligence software sales.

The strength in the broader markets came following the release of a report from payroll processor ADP showing an unexpected decrease by private sector employment in the month of November.

ADP said private sector employment fell by 32,000 jobs in November after climbing by an upwardly revised 47,000 jobs in October.

Economists had expected private sector employment to inch up by 10,000 jobs compared to the addition of 42,000 jobs originally reported for the previous month.

The data added to recently renewed optimism the Federal Reserve will once again lower interest rates at its monetary policy meeting next week.

CME Group's FedWatch Tool is currently indicating an 89.0 percent chance the Fed will cut rates by another quarter point next week.

"This morning's ADP data confirm what a lot of the doves are saying - it's more important to focus on a weakening labor market than to worry about inflation in the 2-3% range (but still above the 2.0% target)," said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management. He added, "Although there may be some dissents at next week's Fed meeting, it is a sure thing that a 25-bps rate cut will be announced, but going forward is where things get more confusing."

Meanwhile, a separate report from the Institute for Supply Management showing an unexpected increase by its reading on service sector activity.

The ISM said its services PMI inched up to 52.6 in November after climbing to 52.4 in October, with a reading above 50 indicating growth. Economists had expected the index to edge down to 52.1.

With the unexpected increase, the services PMI reached its highest level since hitting 53.5 in February.

Sector News

Oil service stocks moved sharply higher amid a rebound by the price of crude oil, driving the Philadelphia Oil Service Index up by 3.7 percent to a ten-month closing high.

Substantial strength was also visible among airline stocks, with the NYSE Arca Airline Index surging by 2.7 percent to its best closing level in almost three months.

Steel, financial and housing stocks also saw considerable strength on the day, while computer hardware stocks showed a notable move to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index jumped by 1.1 percent, while China's Shanghai Composite Index slid by 0.5 percent and Hong Kong's Hang Seng Index slumped by 1.3 percent.

The major European markets also ended the day mixed. While the French CAC 40 Index rose by 0.2 percent, the German DAX Index and the U.K.'s FTSE 100 Index both edged down by 0.1 percent.

In the bond market, treasuries moved to the upside in reaction to the private sector jobs data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell 2.9 basis points to 4.057 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to a report on weekly jobless claims, which may shed additional light on the strength of the labor market.