The three major indexes on Wall Street finished higher for a second straight day. As a private employment gauge came in weaker than expected, hopes for rate cuts spread, drawing buying into traditional industries and blue chips.
On the 3rd (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 408.44 points, or 0.86%, to 47,882.90. The Standard & Poor's (S&P) 500 added 20.35 points, or 0.30%, to 6,849.72, and the Nasdaq composite gained 40.42 points, or 0.17%, to 23,454.09.
According to the ADP National Employment Report, private payrolls in November fell by 32,000 from the previous month. The result contrasted with the market forecast for an increase of 10,000, and the sharp drop of 120,000 in the small-business institutional sector stood out. This is interpreted as a sign of a downturn centered on small businesses and retail.
This slowdown in hiring boosted the odds of a Federal Reserve (Fed) rate cut and, in turn, encouraged risk appetite. As the Fed uses labor conditions as a key metric for rate moves, the latest reading raised expectations for an easier policy.
The Dow's outperformance was backed by buying focused on blue chips. Retail, finance, and industrial sector corporations such as Walmart, The Home Depot, Inc., Procter & Gamble (P&G), Coca-Cola, UnitedHealth, Caterpillar, and American Express led the gains.
The Russell 2000, which is concentrated in small and mid-caps, also jumped 1.91%, showing that expectations for an economic slowdown and rate cuts were reflected across the market.
Scott Welch, chief investment officer (CIO) at Certuity, said, "What the market is watching is the employment data," and noted, "Rate cuts are emerging as a possibility next week."
By contrast, tech stocks slumped on negative news related to Microsoft (MS). The tech outlet "The Information" reported that MS lowered sales targets and quotas for some AI products. MS denied the report, but the market reaction was cool. MS fell 2.5% on the day, and other major big tech names including Apple, Amazon, and Nvidia were down around 1%.
By industry group, all sectors rose except technology and utilities. Financials and energy each climbed more than 1%.
Meanwhile, Salesforce, Inc., which released results after the close, gained more than 5% in after-hours trading as its third-quarter adjusted earnings per share (EPS) topped market expectations.
The Philadelphia semiconductor index rose 1.83%, extending its two-day surge. Semiconductor shares have remained strong, posting gains in the 1.8% range in three of the past four sessions.
American Eagle surged 15% after reporting strong third-quarter results and raising its full-year outlook.
The U.S. services economy continued to recover. According to ISM, the services purchasing managers index (PMI) for November came in at 52.6, up slightly from the prior month's 52.4 and above the market forecast of 52.1.
The Chicago Mercantile Exchange (CME) FedWatch Tool reflected an 89.1% probability that the federal funds rate will be cut by 25 basis points in December.
The Cboe Volatility Index (VIX) fell 0.51 point, or 3.07%, to 16.08 from the previous session.