U.S. equities moved higher again on Wednesday as investors remain confident in the wake of Tuesday’s dovish comments from Federal Reserve Board Chair Janet Yellen downplaying recent inflation data and talking up the downside risks to the economy. As a result, odds of an April rate hike were reduced.
All eyes are now on Friday’s non-farm payroll report for further data on whether Yellen’s reluctance to raise rates again is justified by the economic data. A strong report will embolden the hawks on Yellen’s committee.
In the end, the Dow Jones Industrial Average gained 0.5%, the S&P 500 added 0.4%, the Nasdaq Composite went up 0,.5% and the Russell 2000 ended with a 0.1% gain.
Treasury bonds were mixed, the dollar was weaker, gold lost 0.8% and crude oil lost a fraction to close at $38.26 a barrel. That boosted the ProShares UltraShort Crude Oil (NYSEARCA:SCO) 1.3% to a gain of nearly 4% since recommended to Edge subscribers on March 24.
Technology stocks led the way with a 0.7% gain followed by consumer discretionary, up 0.6%. Utilities were the laggards down 0.2%.
Yoga pants maker Lululemon Athletica inc. (NASDAQ:LULU) gained 10.7% after a strong fourth-quarter earnings per share beat on comp-store sales growth of 11%, well ahead of the 8.2% increase expected. Apple Inc. (NASDAQ:AAPL) gained 1.8% after an upgrade by analysts at Cowen on raised expectations for the iPhone 7 launch later this year.
On the economic front, the ADP private payrolls report increased 200,000 in March following a 205,000 gain in February. This was slightly ahead of estimates for a 195,000 gain. Separately, Chicago Fed President Charles Evans — a dovish, non-voter this year — told CNBC that he sees two rate hikes this year if the data comes in as expected. This is in line with the “dot plot” estimate released earlier this month from the Fed.
Looking ahead to Friday, analysts are looking for payroll growth of 210,000 with the unemployment rate holding steady at 4.9%. Any deviation from these estimates will either raise, or lower, rate hike expectations at time when stocks are at critical technical resistance levels.
The strength of the job market, and Wall Street’s response to the data, will determine whether the next stop is Dow 18,000 (not seen since last summer) or Dow 16,000 (revisiting the January-February low).
Also keep in mind: The start of the expected-to-be-weak Q1 earnings season is less than two weeks away, and as the calendar flips to April the old “sell in May and go away” seasonal weakness meme will resurface.