Stocks Rally on Good News
The services sector is expanding.
All the major indexes closed well in the green on Wednesday.The S&P 500 made a record high for the 25th time so far in 2024, and the Nasdaq Composite bounced on Magnificent Seven strength.
The Dow Jones Industrial Average was down early but rallied, while the Russell 2000 and the S&P/TSX Composite were up all day.
Apple $AAPL was positive for the eighth trading session running – its longest such streak since March 2022.
But Nvidia $NVDA briefly surpassed it to become the No. 2 publicly traded company in the world by market capitalization.
Noteworthy too is the report from the Institute of Supply Management that the US services sector showed its strongest growth in nine months in May.
The ISM’s services index printed at 53.8, up from 49.4 and better than every forecast collected by Bloomberg.
Readings above 50 indicate “expansion.” The 4.4-point monthly increase was the biggest since early 2023.
And the business activity index increased 10.3 points, its biggest jump since March 2021, to 61.2, its highest print since November 2022.
Was it the promise of an ever-expanding AI-driven future and good news about the services sector?
Or were investors, traders, and speculators reacting to the Bank of Canada’s decision to cut its benchmark interest rate from 5.00 percent to 4.75 percent?
The BoC became the first Group of Seven central bank to cut. It’s the first reduction in its policy rate since March 2020.
“With further and more sustained evidence underlying inflation is easing,” BoC Governor Tiff Macklem said in a statement, “monetary policy no longer needs to be as restrictive.”
Officials of the European Central Bank have basically said they’ll cut their benchmark when they meet today in Frankfurt. It’ll be the ECB’s first cut since September 2019.
The yield on the 10-year US Treasury note has been trending lower for more than a week on softer incoming data.
And the futures market now reflects an expectation the Federal Reserve will make its first rate cut in November, forward from and in addition to December and implying two rate cuts this year.
Weekly initial jobless claims data might move markets a little today.
The May jobs report from the Bureau of Labor Statistics is the main event.
We’re starting to narrow the question to whether Jerome Powell and company want to protect the labor market or fight inflation.