Business
Wall Street cheers bad news on jobs, sending stocks higher and betting that a soft labor market will force Powell’s hand in December
Stocks rose on Wall Street Wednesday as more U.S. companies turn in their latest quarterly reports and several economic updates shed some light on the U.S. economy.
The S&P 500 rose 0.5%. The Dow Jones Industrial Average rose 62 points, or 0.1%, as of 11:35 a.m. Eastern time. The Nasdaq composite rose 0.8%.
The gains mark a reversal from the prior day’s dip as big technology stocks once again lead the broader market. Nvidia rose 1.6% and Google’s parent, Alphabet, jumped 2.4%. Their huge values give them outsized influence over the market.
Several big industrial companies also helped lift the market. Companies from a broad spectrum of industries reported their latest financial results and gave updated forecasts.
McDonald’s rose 2% after reporting that its sales benefited from the return of its popular Snack Wraps in the third quarter. International Flavors & Fragrances jumped 4.7% after beating Wall Street’s latest quarterly profit forecasts.
On the losing side, Taser maker Axon Enterprise slumped 11.9% after forecasting weaker profits than analysts were expecting. Live Nation Entertainment fell 7.8% after its latest results fell short of analysts’ forecasts.
The latest round of earnings offers Wall Street a source of information on consumers, businesses and the economy that is otherwise lacking amid the government shutdown. Important monthly updates on inflation and employment have ceased, leaving investors, economists and the Federal Reserve without a fuller picture of the economy.
There are still several informative private economic updates that Wall Street can review.
A monthly report from ADP showed that private payrolls rose more than expected in October. The report offers a partial glimpse into the job market, which has been generally weakening and raising broader concerns about economic growth.
The services sector, which is the largest part of the U.S. economy, expanded in October more than Wall Street expected, according to the Institute for Supply Management. The report shows that while overall business activity grew, employment was still contracting.
“The survey provides a reassuring sign that economic growth persisted in October despite the government shutdown,” Bill Adams, chief economist for Comerica Bank, wrote in a note to investors.
A weaker job market remains a big concern for the Fed. The central bank cut its benchmark rate for the second time this year at its most recent meeting, in part to help bolster the economy amid a weakening job market. Fed Chair Jerome Powell and several other Fed officials have expressed concerns about more rate cuts, as inflation remains stubbornly high and could be fueled by lowering rates.
The mix of a weaker job market and hot inflation leaves the Fed in a tough position.
“For Fed watchers, this ADP report should make it clear that a December rate cut is now in play,” said Jamie Cox, managing partner for Harris Financial Group, in a note to investors. “We are nearing stall speed in the labor market, and that will get the Fed’s attention.”
Wall Street has tempered its expectations for another interest rate cut in December. Investors are now forecasting a 65% chance that the Fed will cut interest rates, according to CME FedWatch. That’s down from a 90% chance just prior to the previous rate cut.
Treasury yields rose in the bond market. The yield on the 10-year Treasury rose to 4.15% from 4.09% late Tuesday. The yield on the two-year Treasury rose to 3.62% from 3.58% late Tuesday.
European markets gained ground and Asian markets closed mostly lower.
