U.S. Stocks Bolstered by Positive Economic Data

By Joyce Yu

Philadelphia, PA–The Wall Street opened sharply higher Wednesday driven by better-than-expected economic data with all three major indexes up 0.2%-0.5%.

Both the Dow and S&P 500 gained over 0.4% at open while the tech-heavy NASDAQ moved moderately by 0.2%.

The newly published ADP National Employment Report showed U.S. companies added the most workers in seven months in October. Private employers hired 235,000 workers last month, exceeding a median forecast of 200,000 among economists polled by Reuters. Domestic private payrolls in September were revised down to an increase of 110,000 from the previous 135,000. The unemployment rate is forecast to stay steady at 4.2 percent.

Private employers hire more workers in October than expected (image credit: Reuters)

The report which is jointly developed with Moody’s Analytics, came ahead of the U.S. Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

U.S. manufacturing also remained robust in October even as expansion at U.S. factories cooled from a 13-year high a month earlier, according to figures from the Institute for Supply Management released Wednesday. Exports have also rebounded this year due to a weak U.S. dollar that’s made American goods more attractive to overseas customers.

Wall Street is keeping a close eye on the Federal Reserve, which will release its latest decision on interest rates and monetary policy this afternoon. The Fed has raised rates twice since January as the central banks gradually tightens monetary policy. As such, there is concern that a shift among central banks away from quantitative easing could revive market volatility. But UBS is hopeful that the well telegraphed path to a smaller balance sheet at the Federal Reserve and the withdrawal of QE at the European Central Bank will help offset the risk.

“We do not expect the reversal of QE to be the catalyst to a meaningfully higher volatility regime in 2018,” Erin Browne at UBS shared with the Financial Times.

With global equity markets continue to march into higher territories, investors are also concerned with low levels of volatility which have distinguished the latter stages of the rally. The Vix index, known as Wall Street’s fear gauge, currently reads 9.8 against a long-term average of 20.

“Our analysis reveals that very low levels of implied equity market volatility have not been a major barrier to subsequent global equity market progress historically,” said Erin Browne.

Thursday is set to be an even bigger day for the central bank when President Trump is expected to announce his choice for Fed chair. Republican lawmakers have delayed the release of their tax reform bill until Thursday. Investors want to see whether the Republicans are able to effectively implement their policies, and get a sense of how tax changes could impact the wider economy.