Sometimes bad news is good news on Wall Street, and Wednesday was a perfect example. Stocks rallied hard after disappointing employment data convinced investors the Federal Reserve is more likely to cut interest rates next week. The Dow jumped more than 400 points as traders recalibrated their expectations based on a labor market that's clearly losing steam.
The ADP report delivered the kind of number that makes central bankers nervous and equity traders excited: U.S. private employers actually shed 32,000 jobs in November. That's a sharp reversal from the 42,000 jobs added in October and badly missed forecasts calling for a 5,000 gain. It's another data point suggesting the labor market is cooling off, which gives the Fed more room to ease monetary policy without worrying about reigniting inflation.
Other economic indicators told a similar story. The S&P Global services PMI declined to 54.1 in November from 54.8 the previous month, revised lower from its preliminary reading of 55. U.S. industrial production managed only a 0.1% month-over-month increase in September, compared to a revised 0.3% decline in August.
Standout Stock Performances
Microchip Technology Inc. (MCHP) stole the show, jumping nearly 12% to become the best performer in the S&P 500 after raising its fiscal third-quarter earnings outlook. Retail also had a moment: Macy's Inc. (M) posted better-than-expected sales and profit for the third quarter, while Dollar Tree Inc. (DLTR) delivered stronger-than-expected quarterly results with healthy sales growth.
Most sectors on the S&P 500 closed positive, with financial, energy, and industrials stocks recording the biggest gains. Utilities and information technology stocks were the outliers, bucking the trend and closing lower.
The Numbers
The Dow Jones closed higher by around 408 points to 47,882.90 on Wednesday. The S&P 500 gained 0.30% to 6,849.72, while the Nasdaq Composite climbed 0.17% to 23,454.09.
Investors are now looking ahead to earnings results from Kroger Co. (KR), Dollar General Corp. (DG), and Hormel Foods Corp. (HRL) today.
Understanding Market Sentiment
The CNN Fear and Greed Index currently sits at 26.1, firmly in the "Fear" zone, though up from its prior reading of 23.2. That's right—even as stocks rallied, the overall sentiment indicator shows investors remain anxious.
The Fear and Greed Index measures current market sentiment based on the premise that excessive fear drives stock prices down, while excessive greed pushes them up. The index calculates its reading from seven equal-weighted indicators and ranges from 0 to 100, where 0 represents maximum fear and 100 signals maximum greediness. Wednesday's reading suggests investors are still nervous, even as they're buying the dip.