U.S. Stocks Move Mostly Higher In Abbreviated Trading Session

After moving mostly higher to start the week, stocks saw further upside over the course of the trading session on Wednesday. With the continued upward move, the Nasdaq and the S&P 500 once again reached new record closing highs in an abbreviated trading session.

The Nasdaq advanced 159.54 points or 0.9 percent to 18,188.30 and the S&P 500 climbed 28.01 points or 0.5 percent, although the narrower Dow bucked the uptrend and edged down 23.85 points or 0.1 percent to 39,308.00.

The strength on Wall Street may partly have reflected optimism about the outlook for interest rates following the release of some weaker than expected economic data.

A report released by the Institute for Supply Management showed an unexpected contraction by U.S. service sector activity in the month of June.

The ISM said its services PMI slid to 48.8 in June from 53.8 in May, with a reading below 50 indicating contraction. Economists had expected the index to edge down to 52.5.

On the inflation front, the prices index dipped to 56.3 in June from 58.1 in June, indicating a modest slowdown in the pace of price growth.

“The Fed will be glad to see that the ISM Services PMI reported cooler inflation, and a little concerned that the economy seems to be losing momentum,” said Bill Adams, Chief Economist for Comerica Bank. “But controlling inflation is still the Fed’s number one priority.”

“They are unlikely to feel comfortable enough with progress on that front to cut rates at the July decision,” he added. “Even so, odds of a rate cut at the following decision in September are higher in light of June’s weak ISM PMIs and rising jobless claims.”

The Labor Department released a separate report showing a modest increase by first-time claims for U.S. unemployment benefits in the week ended June 29th.

The report said initial jobless claims rose to 238,000, an increase of 4,000 from the previous week’s revised level of 234,000.

Economists had expected jobless claims to inch up to 235,000 from the 233,000 originally reported for the previous week.

Payroll processor ADP also released a report showing private sector employment in the U.S. increased by slightly less than expected in the month of June.

ADP said private sector employment climbed by 150,000 jobs in June after rising by an upwardly revised 157,000 jobs in May.

Economists had expected private sector employment to increase by 160,000 jobs compared to the addition of 152,000 jobs originally reported for the previous month.

However, overall trading activity remained somewhat subdued, as the markets closed earlier than usual and remain closed for the Independence Day holiday on Thursday.

Sector News

Gold stocks showed a substantial move to the upside, resulting in a 3.6 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks came amid a sharp increase by the price of the precious metal.

Significant strength was also visible among semiconductor stocks, as reflected by the 1.9 percent jump by the Philadelphia Semiconductor Index.

Steel stocks also turned in a strong performance on the day, driving the NYSE Arca Steel Index up by 1.8 percent.

Airline, networking and oil service stocks also saw some strength, while pharmaceutical and healthcare stocks moved to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index surged by 1.3 percent, while Hong Kong’s Hang Seng Index jumped by 1.2 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index climbed by 0.6 percent, the German DAX Index and the French CAC 40 Index both shot up by 1.2 percent.

In the bond market, treasuries have moved notably higher in reaction to the weaker than expected economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.3 basis points at 4.352 percent.

Looking Ahead

Following the Independence Day holiday on Thursday, trading on Friday is likely to be driven by reaction to the Labor Department’s closely watched monthly jobs report.