U.S. stocks rose on Wednesday, with each of the major indexes closing at a record high, as expectations grew that the Federal Reserve would take a more dovish turn as a raft of data provided more evidence of a slowing economy.
Benchmark U.S. 10-year Treasury Note yields touched its lowest since November 2016 at 1.939 per cent, while euro zone yields tumbled to record lows on bets the European Central Bank’s next chief would stay a dovish course.
Data on Wednesday showed the U.S. trade deficit jumped to a five-month high while services sector data showed a slowdown in activity. The reports come on the heels of data on housing, manufacturing, business investment and consumer spending that point to slowing economic growth in the quarter.
“The data has been mixed, it hasn’t been terrible, sort of a decline generally,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta, Georgia.
“Certainly the bond market is continuing to hit fresh yield lows so that is a message there is a definite slowing and the central banks will have to cut. I guess the equity markets are saying that is going to be OK.”
The Dow Jones Industrial Average rose 179.32 points, or 0.67 per cent, to 26,966, the S&P 500 gained 22.79 points, or 0.77 per cent, to 2,995.8 and the Nasdaq Composite added 61.14 points, or 0.75 per cent, to 8,170.23.
Canada’s main stock index rose on Wednesday led by gains in defensive shares, while those of the world’s largest weed producer Canopy Growth fluctuated after its co-chief executive officer said he was fired from the company.
The Toronto Stock Exchange’s S&P/TSX composite index was up 105.23 points, or 0.64 per cent, at 16,576.52.
Nine of the index’s 11 major sectors were in the positive territory.
The consumer staples and utilities groups, which tend to receive more buying interest when investors are feeling defensive, rose 1.4 per cent and 0.6 per cent each, amid concerns over slowing global growth.
The energy sector finished up 0.4 per cent despite an increase in crude prices.
The heavyweight financial sector gained 0.6 per cent, while the industrials sector also rose 0.6 per cent.
The healthcare sector rose 0.9 per cent, with Canopy Growth Corp. sat up 2 per cent on co-CEO Bruce Linton’s surprise exit.
In New York, the defensive utilities, real estate and consumer staples rose the most among the 11 major S&P sectors as the falling bond yields made stocks that pay high dividends more attractive. The dividend yield for the broad S&P 500 and the 10-year Treasury are nearly identical.
Traders currently see a 29.7 per cent chance the Federal Reserve would cut borrowing costs by half a percentage point at its July 30-31 policy meeting, up from the 25 per cent perceived chance on Tuesday and 24 per cent a week ago. A cut of at least a quarter percentage point is viewed as a certainty.
Rising expectations for a rate cut, fueled by softer economic data and comments from global central banks indicating a more dovish stance helped the S&P 500 and the Dow Jones indexes post their best June performance in decades.
The Atlanta Fed on Wednesday trimmed its second-quarter GDP growth view to 1.3 per cent on an annualized rate, down from 1.5 per cent on Monday.
Trading volumes were thin due to shortened trading hours on Wednesday ahead of the July Fourth holiday. About 4.15 billion shares changed hands in U.S. exchanges, compared with the 6.89 billion daily average over the last 20 sessions.
Additional data on the labor market showed the ADP National Employment Report, considered by some to be a precursor to the Labor Department’s more comprehensive monthly nonfarm payrolls data due on Friday, showed U.S. private employers added 102,000 jobs in June, well below economists’ expectations.
Among stocks, Symantec Corp surged 13.57 per cent, the most on the S&P, after sources told Reuters that chipmaker Broadcom Inc is in advanced talks to buy the cybersecurity firm. Broadcom fell 3.5 per cent.
Tesla Inc rose 4.61 per cent after the electric carmaker set a record for quarterly vehicle deliveries after months of questions about demand for its luxury electric cars.
Oil prices edged higher on Wednesday ahead of a U.S. holiday, after falling steeply a day earlier as worries about a slowing global economy outweighed a decision by OPEC and allies to extend crude output cuts.
Strength in the U.S equities market and data showing U.S. energy firms this week reduced the number of oil rigs operating for the first time in three weeks helped support oil prices.
Each of the major U.S. stock indexes finished at a record closing high, as expectations grew that the Federal Reserve would take a more dovish turn as a raft of data provided more evidence of a slowing economy.
U.S. oil drillers cut five oil rigs in the week to July 3, bringing the total count down to 788, General Electric Co’s Baker Hughes energy services firm said in its closely followed report. Record U.S. crude production has pressured prices over the past year.
September Brent crude futures ended the session up $1.42, or 2.3 per cent, at $63.82 a barrel. U.S. crude futures for August delivery settled up $1.09, or 1.9 per cent, at $57.34 a barrel. On Tuesday, both benchmarks fell more than 4 per cent on worries about a global economic slowdown.
Gains were pared after data showed U.S. crude inventories fell by 1.1 million barrels in the latest week, much less than the 3-million-barrel decrease analysts had expected.
Reuters