Investing.com – Wall Street continued to rally on Wednesday despite the increase in expectations for the Federal Reserve (Fed) to take action this summer and after mixed economic data, while oil pared gains near mid-session, fighting to hold onto $49.
At 15:35GMT or 11:35AM ET, the Dow 30 gained 169 points, or 0.96%, while the S&P 500 rose 15 points, or 0.72%, and the tech-heavy NASDAQ Composite traded up 28 points, or 0.57%.
The minutes from the last Fed meeting along with a string of hawkish comments from officials of the U.S. central bank had been efficient in getting the market to adjust its odds on a summer rate hike.
Fed funds futures were discounting the probability of a rate hike in June at 38% on Wednesday, a far cry from the 4% in the week prior to the minutes, while a move in July had risen to odds of 61%.
Markets were left to digest a string of data between the present and the June 15 meeting, not to mention Fed chair Janet Yellen’s own view on the economy that should be presented first on Friday and perhaps more importantly on June 6.
Meanwhile, the advanced trade deficit data reported on Wednesday gave a positive for growth. The report caused Goldman Sachs to increase its forecast for U.S. second quarter gross domestic product (GDP) to 3.0%, from the prior 2.7%. Morgan Stanley similarly upped its own estimate from 2.0% to 2.4% based on its own read.
However, not all of Wednesday’s numbers were so chipper. Markit’s services purchasing managers’ index (PMI) slipped to a three-month low in May with business optimism at a six-and-a-half year low.
Markit chief economist Chris Williamson said that the deterioration in the composite data for May “deal a blow to hopes that the U.S. economy will rebound in the second quarter after the dismal start to the year”.
Contrary to the aforementioned investment bank forecasts, Williamson predicts growth of only 0.7% for the second quarter.
In other economic data, the house price index for March rose 0.7%, compared to expectations for an increase of 0.4%.
Late Tuesday, St. Louis Fed president James Bullard did suggest that a rate hike in June was “not set in stone”, and insisted that the final decision would depend on the data.
However, he did note in the interview with CNBC that if labor market data was the only factor, “then we’d definitely move”.
On Wednesday, Philadelphia Fed president Patrick Harker largely repeated the view he delivered last Monday, stating that there could be two to three hikes this year.
He noted that he saw no significant risk from China and that while global events were relevant, they don’t drive his own decision-making process.
Later in the session, Minneapolis Fed President Neel Kashkari is due to deliver comments at the Williston Basin Petroleum Conference in North Dakota at 15:40GMT, or 11:40AM ET, while Dallas Fed President Rob Kaplan speaks in Houston at 18:00GMT, or 2:00PM ET.
Oil prices hit fresh seven-month highs on larger-than-expected draws on U.S. inventories.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 4.2 million barrels in the week ended May 20. Market analysts' expected a crude-stock decline of 2.5 million barrels, while the American Petroleum Institute late Tuesday reported a supply drop of 5.2 million barrels.
Still, gains were pared while nearing mid-session in the U.S. with West Texas Intermediate fighting to hold onto $49. Specifically, U.S. crude futures gained 0.88% to $49.05 by 15:37 GMT, or 11:37AM ET, while Brent oil traded up 1.42% to $49.30.
In company news, shares of Hewlett Packard Enterprise Co (NYSE:HPE) soared more than 9% on news it would spin off its enterprise services unit, which will merge with Computer Sciences.
Computer Sciences Corporation (NYSE:CSC) shares also bounced on the merger announcement, adding 34%.
On the downside, luxury jeweler Tiffany & Co (NYSE:TIF) lost around 2% after reporting disappointing quarterly earnings Wednesday morning.
Intuit (NASDAQ:INTU) beat consensus and raised its annual forecast. However, the financial solutions provider traded down more than 3% in what appeared to be a case of “buy the rumor and sell the news” after having risen 6% in the last three days.
Costco, Lions Gate Entertainment and Williams-Sonoma will post numbers after Wall Street closes.