Wall Street ends higher as economic data fuels rate-pause bets

The traditional Dow rose only modestly but the tech-heavy Nasdaq and S&P had very good days with all of today’s data coming in lower than expected, thus encouraging the optimism over continuing rate pauses. Private payroll increases came in at 177K (vs 195 est) and GDP growth at 2.1% (vs 2.4), all of which supported a cooling economy and thus also cooling inflation. The odds for a September pause now stand at 89% vs Monday’s 80% and also increasing optimism for a soft landing. Monday’s prediction for light volume all week proved true for a third day with only 9 billion shares traded.  Thursday is PCE, Friday non-farm payrolls. 

Wall Street ends higher as economic data fuels rate-pause bets

By Shristi Achar A and Noel Randewich

Wed August 30, 2023  4:25 PM

DJ: 34,852.67  +292.69        NAS: 13,943.76  +238.63        S&P: 4,497.63  +64.32     8/29

DJ: 34,890.24  +37.57          NAS: 14,019.31  +75.55          S&P: 4,514.87  +17.24     8/30

Aug 30 (Reuters) - The S&P 500 (.SPX) and Nasdaq (.IXIC) closed higher on Wednesday as fresh economic data signaled a cooling U.S. economy, reinforcing expectations the Federal Reserve will pause rate hikes in September.  The S&P 500 index reached its highest in nearly three weeks after an ADP National Employment report showed private payrolls increased by 177,000 jobs in August, compared with estimates of 195,000, suggesting a softening labor market.  The Nasdaq logged its highest close since Aug. 1.  Fresh gross domestic product numbers showed the U.S. economy expanded 2.1% in the second quarter, slower than a preliminary estimate of a 2.4% growth. 

"Somewhat softer employment data is easing investor concerns for future Federal Reserve interest rate hikes," said Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management.  The prospect of a "softer landing" for the U.S. economy also supported demand for growth stocks and other riskier assets at the expense of defensive stocks, Haworth added.

Nvidia (NVDA.O) rose 1% to close at its highest ever. It was Wall Street's most traded company, with $35.5 billion worth of shares exchanged during the session.  Mastercard (MA.N) and Visa (V.N) gained around 0.5% each after a report said the companies were preparing to raise credit card fees.  HP Inc (HPQ.N) tumbled 6.6% after the personal computer maker trimmed its annual forecast due to slowing demand.  Brown-Forman (BFb.N) fell 4% after the Jack Daniels whiskey maker missed its first-quarter sales and profit estimates.

Traders' bets on the Fed leaving interest rates unchanged in September stood at nearly 89%, up from 86% the day before, while bets of a pause in November rose to 54% from about 52%, the CME Group's FedWatch tool showed.  U.S. Treasury yields slipped to a near three-week low, with the 10-year yield last at 4.12%.

Volume on U.S. exchanges was light, with 9.0 billion shares traded, compared to an average of 10.6 billion shares over the previous 20 sessions.

The S&P 500 climbed 0.38% to end at 4,514.87 points.  The Nasdaq gained 0.54% at 14,019.31 points, while Dow Jones Industrial Average rose 0.11% to 34,890.24 points. Of the 11 S&P 500 sector indexes, nine rose, led by information technology (.SPLRCT), up 0.83%, followed by a 0.51% gain in energy (.SPNY).

Investors are now looking to the personal consumption expenditures price index, the Fed's preferred measure of inflation, and non-farm payroll numbers due on Thursday and Friday, respectively, for more clues on interest rates.  Trading activity has been light this week ahead of Monday's U.S. Labor Day holiday.

Advancing issues outnumbered falling ones within the S&P 500 (.AD.SPX) by a 1.9-to-one ratio.

The S&P 500 posted 24 new highs and one new low; the Nasdaq recorded 70 new highs and 76 new lows.