FX.co ★ U.S. Stocks Show Notable Rebound After Initial Move To The Downside

Following a sluggish start, stocks made a significant recovery in Wednesday's trading session. Major averages substantially recovered from session lows to venture into positive ground.

The Nasdaq and S&P 500 indexes hit new session highs in recent trading. The Nasdaq rose by 83.81 points or 0.5 percent, settling at 16,324.26, while the S&P 500 experienced a 20.90 point or 0.4 percent increase, ending at 5,226.71. The Dow saw a rise of 97.2 points or 0.3 percent, closing at 39,267.45.

The Wall Street rebound ensued following the release of a report by the Institute for Supply Management that indicated an unforeseen deceleration in the pace of U.S. service sector growth in March. According to the ISM, its service sector PMI dropped to 51.4 in March from 52.6 in February. While a figure above 50 reaffirms growth in the sector, economists estimated the index to nudge up to 52.7.

The report further revealed a considerable slowing down in price growth pace within the sector, demonstrated by the prices index falling to 53.4 in March from 58.6 in February—the lowest it's been since March 2020.

This data has eased recent anxieties about interest rate forecasts, which played a part in Tuesday's sharp stock plunge. Fears about possible Federal Reserve reluctance to decrease interest rates also contributed to this initial instability, especially after payroll firm ADP released a report earlier in the day showing higher than anticipated private sector job growth for the U.S. in March.

ADP reported a surge in private sector jobs by 184,000 in March, after a revised increase of 155,000 jobs was noted in February. Economists predicted an increase of 148,000 jobs, compared to the original estimate of a 140,000 job addition for the previous month.

Reflecting the harsh realities imposed by inflation, the report also mentioned a significant year-on-year pay growth acceleration of 10.0 percent for job-changers in March. ADP's chief economist, Nela Richardson, commented that while inflation is simmering down, pay rates are heating up in both goods and services sectors.

Despite the broader markets regaining stabilization, Intel's shares proceeded to weaken substantially. The tech titan saw a 6.9 percent plunge following the disclosure of a $7 billion operating loss by its semiconductor manufacturing branch in 2023—a considerable increase from 2022's $5.2 billion operating loss.

Sector News revealed computer hardware stocks exhibiting an upward trend for the day, propelling the NYSE Arca Computer Hardware Index up by 1.5 percent. Gold stocks also gained considerable strength, with the NYSE Arca Gold Bugs Index registering a 1.4 percent growth—its best intraday level in over ten months. This trend was backed by a consistent rise in the gold price, with June deliveries soaring by $21.90 to $2,303.70 an ounce.

Transportation, energy, and brokerage stocks also trended upwards on the day, while tobacco stocks exhibited signs of weakness.

In international markets, the majority of trading across the Asia-Pacific region remained bearish on Wednesday, with Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index falling by 1.0 and 1.2 percent, respectively. In contrast, major European markets displayed mixed performances—France's CAC 40 Index and Germany's DAX Index both rose by 0.3 percent, whereas the U.K.'s FTSE 100 Index fell by 0.2 percent.

In the bond market, treasury yields advanced from their session lows but remained in the red. Consequently, the yield on the ten-year benchmark note, which inversely relates to its price, increased by 3.0 basis points to 4.395 percent.