Wall Street’s major indices climbed on Wednesday as the market bought into the possibility of an interest rate cut by the Federal Reserve.
Speculation of a rate cut gained ground after the release of weak private sector jobs figures, coupled with optimism that the US and Mexico could agree terms to avoid new tariffs on Mexican goods.
The gains extended Tuesday’s rally after Fed chairman Jerome Powell hinted that a rate cut was possible and other central bank officials indicated that they might have to react to the US trade wars.
US private employers recruited at the slowest pace in more than nine years in May, according to data from the ADP National Employment Report, released on Wednesday.
Analysts blamed the weak figures on escalating global trade tensions.
The data comes ahead of the more comprehensive non-farm payrolls from the US labour department on Friday.
Investors were also buoyed by President Trump saying that he thinks Mexico wants to reach a deal to stop a new trade war.
Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said: “A Mexico deal would alleviate one of the risks that lurk out there.
“You have a little spillover from yesterday’s enthusiasm around the anticipation that the Fed may be more responsive to adjusting monetary policy.”
By 3pm Eastern Time, the Dow Jones Industrial Average rose 167.58 points, or 0.66%, to 25,499.76.
The S&P 500 gained 16.93 points, or 0.60%, to 2,820.2, and the Nasdaq Composite added 28.26 points, or 0.38%, to 7,555.38.
According to Mr Luschini, the US market was ripe for a rally, because of a more than 6% decline in the three major indices in May, when fears of a global slowdown re-emerged on the back of a resumption in US-China trade tensions.
But he warned that because investors appeared to be favouring defensive sectors such as utilities, real estate and consumer staples – rather than riskier sectors – there needed to be caution about reading too much into Wednesday’s advance.
In oil, Brent crude fell below the $60 a barrel mark on Wednesday for the the first time since January this year, before rallying back to $60.65.