Major U.S. stock indexes ended higher on Wednesday, a day after selling off, as the latest economic data showed U.S. private payrolls increased less than expected in September. Consumer discretionary rose 2%, leading S&P 500 sectors higher, followed by communication services and technology, as U.S. Treasury yields eased off of 16-year highs.
Canada’s main stock index ended nearly unchanged, as gains were capped by a sharp drop in oil prices that weighed on energy shares amid global growth concerns.
The day’s rally in bonds, whose price is inverse to yield, was likely short-lived, with the September unemployment report on Friday now the market’s next focus, said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.
“The sell-off has been really dramatic. It’s been rapid. It’s been huge,” Rupert said. “The market was so over-sold that it was looking for a catalyst to rally on and found it in ADP.”
Rupert referred to the ADP National Employment Report that showed U.S. private payrolls rose by 89,000 jobs in September, the smallest gain since January 2021.
Early in the day, the yield on 10-year U.S. Treasury notes touched 4.884%, a fresh 16-year high, while 30-year Treasury yields rose above 5% for the first time since August 2007. But they later retreated, and by late afternoon, the 10-year yield was down about 6 basis points. Canadian bond yields eased by a similar degree.
“ADP is the canary in the coal mine that things are slowing,” said Rhys Williams, chief strategist at Sprouting Rock Asset Management in Bryn Mawr, Pennsylvania. “The upcoming job reports are going to be less robust than the previous few months.”
The market ignored a survey from the Institute for Supply Management (ISM) that showed the U.S. services sector slowing in September as new orders fell to a nine-month low. But inflation remained elevated and employment slowed only gradually.
The U.S. economy’s resilience, 18 months after the Federal Reserve started raising interest rates to cool demand, suggests that monetary policy could remain tight for some time.
Market expectations for a rate hike in November slid to a 23.7% chance from 28.2% on Tuesday, according to CME Group’s FedWatch Tool. Implied interest rate probabilities in swaps markets suggest whether the Bank of Canada hikes interest rates again through next spring is down to a coin flip.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 13.89 points, or 0.1%, at 19,034.81, after posting on Tuesday its lowest closing level in one year.
The energy sector dropped 4.1%, touching a near six-week low, as the price of oil settled down 5.6% at US$84.22 a barrel. The oil price tested 13-month highs of US$94 a week ago. Wednesday’s retreat came as U.S. data showed weaker demand for, and rising inventories of, gasoline.
“The current state of the oil market is that global economic pain is coming courtesy of surging bond yields,” Edward Moya, a senior market analyst at OANDA, said in a note. “Crude demand destruction will occur this quarter, but this pullback in prices will be limited given the risks of further shocks to supplies and a reacceleration of the U.S. economy.”
The materials sector was also a drag for the TSX. It fell 0.4% as copper prices slumped on global growth concerns.
The pullback in bond yields helped support interest rate sensitive sectors. Real estate rose 1.9%, technology advanced 1.5% and heavily-weighted financials ended up 0.7%.
The Dow Jones Industrial Average rose 127.17 points, or 0.39%, to 33,129.55, the S&P 500 gained 34.3 points, or 0.81%, at 4,263.75 and the Nasdaq Composite added 176.54 points, or 1.35%, at 13,236.01.
Several mega-cap shares including Amazon.com were higher on the day.
Ford Motor was near flat even as the automaker posted a nearly 8% rise in U.S. auto sales for the third quarter.
Investors looking for non-economic data to focus on are keen for third-quarter earnings reports to kick off mid-month. S&P 500 company earnings are expected to have risen 1.6% year-over-year for the quarter, according to LSEG data.
Volume on U.S. exchanges totaled 10.50 billion shares, compared with the 10.63 billion average for the full session over the last 20 trading days.
Advancing issues outnumbered decliners on the NYSE by a 1.45-to-1 ratio; on Nasdaq, a 1.30-to-1 ratio favored advancers.
The S&P 500 posted one new 52-week high and 40 new lows; the Nasdaq Composite recorded 18 new highs and 398 new lows.
Reuters, Globe staff