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Stocks closed higher on Wednesday as the latest jobs data from ADP led investors to increase their bets that the Federal Reserve will cut interest rates next week.
The Dow Jones Industrials ballooned 408.44 points to end Wednesday at 47,882.90.
The S&P 500 Index regained 20.35 points to 6,949.72.
The NASDAQ re-strengthened 40.42 points to 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.
Markets are pricing in an 89% chance of a cut next Wednesday, which is much higher than the odds from mid-November. 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.
Microsoft shares were a sore spot during the session, falling more than 1% after The Information reported it was cutting software sales quotas tied to artificial intelligence. The stock came off its lows of the day after the company denied that they had lowered sales quotas for salespeople.
Other names linked to the AI trade, including chipmakers Nvidia and Broadcom, fell in sympathy with Microsoft. Micron Technology was similarly under pressure, dropping more than 2%.
Despite the tough reading on the economy, traders were likely betting that the private job losses could clinch a Federal Reserve rate cut at its last meeting of the year next week.
Traders are optimistic about corporate earnings results and are looking ahead to the Fed’s interest rate decision on Dec. 10. Markets are pricing a roughly 89% chance of a cut during the upcoming meeting, which is much higher than the odds from mid-November.
The 10-year Treasury gained, lowering yields to 4.06% from Tuesday’s 4.09%. Treasury prices and yields move in opposite directions.
Oil prices gained 47 cents to $59.11.
Gold prices spiked $16.70 to $4,237.50.
