US open: Stocks rise on weak data as bond yields drop

(Sharecast News) - US stocks rose strongly on Wednesday morning as investors mulled over weak economic data, sinking bond yields and details of Treasury bond sales, ahead of the conclusion of the two-day Federal Open Market Committee meeting. The Dow Jones Industrial Average was up 0.6% after around an hour into the trading session, while the S&P 500 gained 0.8% and the Nasdaq rose 0.9%.

The US economy added fewer jobs than expected in the month of October, though figures indicate a "well-rounded jobs picture", according to the closely watched ADP Employment Report. Private employers added a net 113,000 jobs last month, up from 89,000 in September, but well below the consensus estimate of 150,000. Meanwhile, ADP said that annual pay for people in the same job was up just 5.7% year-on-year - the slowest pace of growth since October 2021.

The ADP report is seen as a less reliable barometer of labour-market activity than the official non-farm payrolls report due out on Friday, which is expected to show a figure closer to 180,000 for October.

The ISM manufacturing PMI unexpectedly fell to 46.7 in October, despite forecasts for September 49.0 reading to remain unchanged. The new orders index and employment index both worsened while there was some increase in the prices paid index - though all three remained firmly in negative territory.

Commenting on the disappointing ADP and ISM data, analyst Michael Hewson from CMC Markets said: "These weaker economic numbers will be welcomed by the Federal Reserve later today as evidence that the US economy is slowing and that a pause is appropriate, and that we could well be done as far as further rate hikes are concerned."

Meanwhile, the JOLTS survey showed that job openings were more or less steady at 9.553m in September after a revised 9.497m in August, slightly ahead of the 9.250m forecast.

In other news, the Treasury Department announced details of its bond auctions, saying it would increase the size of its sales to handle its growing debt load given the recent rise in yields. It plans to sell $112bn in notes and bonds next week, up from $103bn last quarter, and refund $102bn of notes maturing on 15 November to raise $9bn in extra funds.

The yield on a 10-year US Treasury was down 15 basis points at 4.784% - its lowest level in over two weeks.

Fed in focus

Investors will now be looking ahead to the FOMC decision, due at 1400 ET. The Fed is widely expected to leave interest rates unchanged for the second straight meeting, but all eyes will be on chair Jerome Powell as he delivers his statement to the press.

"Powell will probably emphasize the progress made by the central bank in addressing inflation while reiterating that inflation remains too high. He might even indicate that additional rate hikes may be necessary to bring inflation down to the Fed's 2% target. It's all about credibility, and the Fed has to talk tough on the inflation front," said Stephen Innes, managing partner at SPI Asset Management.

"Sadly for stocks, a parked-in-neutral Fed may welcome these higher for longer long-term yield. Put another way, no rate cuts well into 2024."

WeWork hits record low

WeWork shares were at a record low, down over 50% on the day, on rumours that the company is to file for bankruptcy. The Wall Street Journal reported on Tuesday that the company might file for Chapter 11 protection in New Jersey.

Advanced Micro Devices jumped 8% after beating forecasts with third-quarter revenues and profits, though it did disappoint with its fourth-quarter revenue guidance.

Cosmetics company Estée Lauder tanked 18% after cutting its outlook for fiscal 2024. The company pointed to incremental external headwinds, namely from the slower growth in overall prestige beauty in Asia travel retail and in mainland China.

Pharmacy operator CVS was slightly lower despite its third-quarter results beating expectations, partly due to a strong performance from the health services division.