NEW YORK (AP) — Stocks gained ground on Wall Street after several positive economic updates and a steady stream of quarterly reports from U.S. companies.
The S&P 500 rose 0.4% on Wednesday. The Dow Jones Industrial Average rose 0.5%, while the Nasdaq composite rose 0.6%. McDonald’s rose after reporting that its sales benefited from the return of its popular Snack Wraps in the third quarter. Taser maker Axon Enterprise slumped after forecasting weaker earnings than analysts expected. A report showed that the services sector grew in October. European markets rose and Asian markets largely fell.
The gains were broad-based and marked a reversal from the previous day’s dip. Nearly every sector within the S&P 500 gained ground, and the index recovered most of its losses from Tuesday.
Big tech stocks once again led the broader market. Nvidia rose 1.3% and Google’s parent company Alphabet rose 2.1%. Their enormous values give them outsized influence on the market. Retailers and financial companies also helped lift the market.
Corporate earnings and forecasts were once again a key focus for Wall Street, with results from a broad spectrum of sectors.
McDonald’s rose 2.7% after reporting that sales benefited from the return of the popular Snack Wraps in the third quarter. International Flavors & Fragrances rose 6.5% after beating Wall Street’s latest quarterly profit forecasts.
On the losing side, Taser maker Axon Enterprise fell 9.4% after forecasting weaker earnings than analysts expected. Live Nation Entertainment fell 8.2% after its latest results fell short of analyst expectations.
The latest round of earnings provides Wall Street with a source of information about consumers, companies and the economy that is otherwise missing during the government shutdown. Important monthly updates on inflation and employment have stoppedpreventing investors, economists and the Federal Reserve from getting a more complete picture of the economy.
There are still several informative private economic updates for Wall Street to review.
A monthly report from ADP shows that private wage costs rose more than expected in October. The report provides a partial look at the labor market, which is generally weakened and raising broader concerns about economic growth.
The services sector, which makes up the bulk of the U.S. economy, grew more strongly in October than Wall Street expected, according to the Institute for Supply Management. The report shows that although overall business activity grew, employment still fell.
“The survey provides a reassuring sign that economic growth continued in October despite the government shutdown,” Bill Adams, chief economist at Comerica Bank, wrote in a letter to investors.
A weaker labor market remains a major concern for the Fed. The central bank cuts its benchmark rate for the second time this year at its most recent meeting, in part to help strengthen the economy amid a weakening labor market. Lower interest rates can make a wide range of loans and credits cheaper, potentially boosting economic growth. But lower interest rates could also fuel inflation, which could hinder economic growth.
Fed Chairman Jerome Powell and several other Fed officials have expressed concerns about further rate cuts as inflation remains stubbornly above the central bank’s 2% target. Consumer prices rose by 3% in September.
The combination of a weaker labor market and high inflation puts the Fed in a difficult position.
“For Fed watchers, this ADP report should make it clear that a December rate cut is now on the cards,” Jamie Cox, managing partner of Harris Financial Group, said in a note to investors. “We are approaching stagnation in the labor market, and that will get the Fed’s attention.”
Wall Street has tempered its expectations for another rate cut in December. According to CME FedWatch, investors now predict a 63% chance that the Fed will cut rates. That is less than the 90% probability just before the previous interest rate cut.
The threat of tariffs also continues to hang over consumers and businesses. President Donald Trump’s trade war with China, Canada and many other countries has been unpredictable. The full impact of higher prices is difficult to predict due to constant shifts in policy. The U.S. Supreme Court will hear the arguments Wednesday on the legality of the drastic tariffs.
Interest rates on government bonds rose on the bond market. The yield on the 10-year government bond rose to 4.16% from 4.09% late Tuesday. The yield on the two-year government bond rose to 3.63% from 3.58% at the end of Tuesday.
European markets gained ground and Asian markets closed largely lower.
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