U.S. Stocks Rally Following Upbeat Economic Data

Stocks moved sharply higher during trading on Wednesday, offsetting the pullback seen over the two previous sessions. The rally lifted the tech-heavy Nasdaq to a three-month closing high, while the S&P 500 reached its best closing level in almost two months.

The major averages pulled back off their highs going into the close but held on to strong gains. While the Nasdaq spiked 319.40 points or 2.6 percent to 12,668.16, the S&P 500 surged 63.98 points or 1.6 percent to 4,155.17 and the Dow jumped 416.33 points or 1.3 percent to 32,812.50.

The rebound on Wall Street partly reflected a positive reaction to some upbeat U.S. economic data, which helped ease concerns about a recession.

A report released by the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. services sector activity in the month of July.

The ISM said its services PMI rose to 56.7 in July from 55.3 in June, with a reading above 50 indicating growth in the sector. The uptick came as a surprise to economists, who had expected the index to dip to 53.5.

The unexpected increase by the services PMI came after the index edged down to its lowest reading since May 2020 in the previous month.

“Looking ahead, services activity will be fairly muted as hot inflation, tighter financial conditions, supply chain stress, downbeat sentiment and softening spending restrain growth,” said Oren Klachkin, Lead US Economist at Oxford Economics.

“The recovery’s best days are clearly in the rear-view mirror, but this doesn’t mean an economic downturn has begun,” he added. “We think fundamentals are strong enough to prevent a recession this year, though the window to achieving a softish landing is narrowing.”

A separate report from the Commerce Department showed a significant increase in new orders for U.S. manufactured goods in the month of June.

The report showed factory orders shot up by 2.0 percent in June after surging by an upwardly revised 1.8 percent in May.

Economists had expected factory orders to advance by 1.1 percent compared to the 1.6 percent jump originally reported for the previous month.

Sector News

Airline stocks moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 3.9 percent to its best closing level in almost two months.

Substantial strength was also visible among biotechnology stocks, as reflected by the 3.8 percent spike by the NYSE Arca Biotechnology Index.

Moderna (MRNA) helped lead the biotech sector higher, surging by 16 percent after reporting better than expected second quarter results.

Semiconductor stocks also turned in a strong performance on the day, driving the Philadelphia Semiconductor Index up by 2.7 percent to a nearly two-month closing high.

Brokerage, retail and computer hardware stocks also saw considerable strength on the day, while energy and gold stocks the uptrend amid decreases in commodities prices.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.5 percent, while China’s Shanghai Composite Index slid by 0.7 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.’s FTSE 100 Index climbed by 0.5 percent, the French CAC 40 Index and the German DAX Index both jumped by 1.0 percent.

In the bond market, treasuries recovered from early weakness to end the session little changed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.748 percent after reaching a high of 2.849 percent.

Looking Ahead

Reports on weekly jobless claims and the U.S. trade deficit are likely to attract attention on Thursday, although trading activity may be somewhat subdued ahead of the release of the more closely watched monthly jobs report on Friday.

Earnings news may also remain in focus, with Allstate (ALL), Clorox (CLX), eBay (EBAY), Hostess Brands (TWNK) and MetLife (MET) among the companies releasing their quarterly results after the close of today’s trading.

Alibaba (BABA), Cigna (CI), ConocoPhillips (COP), Eli Lilly (LLY), Kellogg (K) and Wayfair (W) are also among the companies due to report their results before the start of trading on Thursday.

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