Dow closes 400 points higher as ADP jobs data strengthens Fed rate cut hopes
Stocks closed higher on Wednesday as the latest jobs data from ADP strengthened investors’ conviction that the Federal Reserve will cut interest rates next week.
The Dow Jones Industrial Average gained 408.44 points, or 0.86%, to finish at 47,882.90. The S&P 500 traded up 0.3% to end the day at 6,849.72, while the Nasdaq Composite added 0.17% to settle at 23,454.09.
Payrolls processor ADP reported that private payrolls surprisingly declined by 32,000 in November. Economists polled by Dow Jones had expected an increase of 40,000 for the month. Despite the tough reading, traders were likely betting that the private job losses will lead the Fed to slash rates at its last meeting of the year next week.
“The labor market, that’s what people are going to focus on,” Scott Welch, Certuity’s chief investment officer, said in an interview with CNBC. “The numbers will come in as they come in, and it’ll either lead toward a cut or not, but I suspect that there’s no question there will be a cut next week.”
Markets are pricing in an 89% chance of a cut next Wednesday, which is much higher than the odds from mid-November, according to the CME FedWatch tool. Investors anticipate that a lower rate environment will spur loan growth and give a jolt to the U.S. economy, which led shares of key financial stocks like Wells Fargo and American Express higher Wednesday.
Source: CNBC.com
