US stocks surge as recent data refuels hopes on Fed’s pause

The major Wall Street indexes rose on Wednesday as new economic data revealed a slowing US economy, maintaining predictions that the Federal Reserve will hold off on raising interest rates in September. In August, private payrolls expanded by 177,000 jobs, versus predictions of 195,000, according to the ADP National Employment report, indicating a deteriorating labour market. Newly released gross domestic product (GDP) figures revealed that the U.S. economy grew by 2.1% in the second quarter, which was less quickly than an earlier estimate of 2.4% growth.

Markets are once again in a position where bad news can really be considered positive as long as interest rates are concerned. Gains in Visa up 0.9%, kept the cyclicals-heavy Dow Jones afloat, after a report said the company and rival Mastercard, up 1.3%, were preparing to raise credit-card fees. Among other major movers of the day, HP Inc slid 7.9% as the personal computer maker trimmed its annual forecast due to slowing demand.

According to the CME Group’s FedWatch tool, traders’ betting on the Fed keeping interest rates constant in September increased to nearly 91% from 88.5% before the release of the private payrolls and GDP figures, while bets on a pause in November increased to 55% from roughly 52% a day earlier.

The 10-year yield yesterday stood at 4.1% as US Treasury yields declined to a level that is almost three weeks low. Significant growth stock shares fluctuated between gains and losses. Tesla lost 0.3%, while Apple and Netflix each had gains of almost 1.4%. Ten of the eleven significant S&P 500 sectors had increases, with energy and information technology leading the way with gains of 0.8% and 0.7%, respectively.

Investors now await 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 heading into the Labor Day holiday, with full-day volumes below the 20-day average for the past eight sessions. Volumes on Wednesday were at about 3.7 billion by midday. The Dow Jones Industrial Average was up 62.61 points, or 0.18%, at 34,915.28, the S&P 500 was up 18.63 points, or 0.41%, at 4,516.26, and the Nasdaq Composite (.IXIC) was up 80.95 points, or 0.58%, at 14,024.70.

Vaalco Energy retreated by 17.8%, likely due to a military coup in Gabon, where the oil producer has operations.

Brown-Forman fell 4.5% after the Jack Daniels whiskey maker missed its first-quarter sales and profit estimates. Advancing issues outnumbered decliners by a 2.19-to-1 ratio on the NYSE and by a 1.44-to-1 ratio on the Nasdaq. The S&P index recorded 23 new 52-week highs and one new low, while the Nasdaq recorded 45 new highs and 51 new lows.