US stocks have risen, with each of the major indexes closing at a record high, as expectations grew the Federal Reserve would take a more dovish turn as a raft of data provided more evidence of a slowing economy.
Benchmark US 10-year Treasury Note yields touched its lowest since November 2016 at 1.939 per cent, while eurozone yields tumbled to record lows on bets the European Central Bank’s next chief would stay a dovish course.
Data on Wednesday showed the US 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 on Wednesday 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.
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, fuelled 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 annualised rate, down from 1.5 per cent on Monday.
Trading volumes were thin due to shortened trading hours on Wednesday ahead of the Fourth of July holiday. About 4.15 billion shares changed hands in US exchanges, compared with the 6.89 billion daily average over the last 20 sessions.
Additional data on the labour 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 US private employers added 102,000 jobs in June, well below economists’ expectations.
Among stocks, Symantec surged 13.57 per cent, the most on the S&P, after sources told Reuters that chipmaker Broadcom is in advanced talks to buy the cybersecurity firm. Broadcom fell 3.5 per cent.
Tesla rose 4.61 per cent after the electric car-maker set a record for quarterly vehicle deliveries after months of questions about demand for its luxury electric cars.
Advancing issues outnumbered declining ones on the NYSE by a 2.64-to-1 ratio; on Nasdaq, a 1.85-to-1 ratio favoured advancers.
The S&P 500 posted 85 new 52-week highs and no new lows; the Nasdaq Composite recorded 88 new highs and 40 new lows.