NEW YORK, Aug 30 (Reuters) – US stocks ended higher on Wednesday and the dollar extended losses as a string of disappointing economic data raised the likelihood that the Federal Reserve will call for a pause in its efforts to rein in inflation .
All three major US stock indexes gained, with the Nasdaq posting the largest percentage gain. The blue-chip Dow only closed nominally higher.
With one trading day remaining in August, all three indices are on course for monthly losses, with the S&P 500 (.SPX) posting its biggest monthly percentage decline since February and the tech-heavy Nasdaq (.IXIC) setting the stage for its biggest monthly slide this year.
A flurry of economic indicators generally surprised to the downside, including a 52.3% monthly decline in personal payrolls and a sharply downgraded Q2 GDP of 1.7% on an annualized basis.
Weak economic data could be good news for interest rates as it could give the Federal Reserve a reason to leave interest rates unchanged at next month’s monetary policy meeting.
“It’s pretty clear that the Fed’s tightening is having the desired effect, and that’s reflected in the job creation and job opening numbers,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “For now, from a statistical perspective, it’s likely that we won’t see a recession this year.”
Thomas Martin, senior portfolio manager at GLOBALT in Atlanta, agreed.
“(The data) fits with the idea that central banks have another data point that makes it easier for them to remain stable rather than opting for more rate hikes,” Martin said.
GDP
According to CME’s FedWatch tool, financial markets are currently pricing in an 88.5% chance of a September Fed pause.
The Dow Jones Industrial Average (.DJI) was up 37.7 points, or 0.11%, to 34,890.37, the S&P 500 (.SPX) was up 17.24 points, or 0.38%, to 4,514.87 and the Nasdaq Composite (.IXIC) was up 75.55 points, down 0.54% to 14,019.31.
On the other side of the Atlantic, European equities ended slightly lower, falling from a two-week high as weakness in the utilities sector was offset by gains in insurance and basic resources.
The pan-European STOXX 600 index (.STOXX) was down 0.15% and the MSCI global equity index (.MIWD00000PUS) was up 0.46%.
Emerging market equities rose 0.11%. MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) closed 0.41% higher, while Japan’s Nikkei (.N225) was up 0.33%.
The dollar extended losses to hit a two-week low against a basket of world currencies on disappointing economic data.
The dollar index (.DXY) fell 0.32%, while the euro rose 0.4% to $1.0921.
The Japanese yen weakened 0.26% against the greenback to 146.29 per dollar, while sterling last traded at $1.2717, up 0.63% on the day.
US Treasury yields were basically unchanged in the choppy trade after hitting three-week lows earlier in the session as slower-than-expected economic growth reduced the possibility of further rate hikes in the coming months.
Benchmark 10-year bonds were last up 1/32 in price from 4.122% late Tuesday to a yield of 4.1178%.
The 30-year bond was last up 4/32 in price to yield 4.2294%, compared to 4.237% late Tuesday.
Crude oil prices rose slightly as industry data showed supply was tighter than expected as investors digested the potential impact of Hurricane Idalia on demand.
US crude was up 0.58% to trade at $81.63 a barrel, while Brent was at $85.86 a barrel, up 0.43% on the day.
Gold prices rose despite US dollar weakness.
Spot gold rose 0.3% to $1,943.15 an ounce.
Reporting by Stephen Culp; Edited by Sharon Singleton, Nick Zieminski and Josie Kao
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