The close: Stocks rise, U.S. bond yields fall, as traders brace for employment data

The close: Stocks rise, U.S. bond yields fall, as traders brace for employment data

Global equity markets rose on Thursday after lower-than-expected private payrolls data stirred hopes that the American economy was likely cooling and the Federal Reserve might be persuaded to modify its aggressive stance on interest rates and inflation. The TSX rose solidly, led by gains in the materials, industrials and technology sectors, with a weaker greenback helping to send commodity prices higher.

The ADP National Employment Report showed that private payrolls rose by 128,000 jobs in May, which was much lower than the consensus estimate of 300,000 jobs and suggested that demand for labor was starting to slow.

If the private payrolls data is reaffirmed by the Labor Department’s more comprehensive jobs report on Friday, then the Fed would be unlikely to continue its pace of rate hikes, said Sandy Villere, portfolio manager at Villere & Co in New Orleans.

“Essentially, bad news is good news and good news is bad news. That means the economy is maybe cooling a little bit and the Fed can maybe calm down on their hikes because that is essentially controlling everything right now,” Villere said.

For now, though, U.S. rate expectations remained unchanged. The rate futures market has penciled in about 195 basis points of cumulative tightening in 2022 and a fed funds rate of 2.788% after the December Fed meeting.

Fed Vice Chair Lael Brainard on Thursday further added to the view that rates will continue to rise at a fast pace.

“Right now it’s very hard to see the case for a pause,” she told CNBC. “We’ve still got a lot of work to do to get inflation down to our 2% target.”

Brainard said she backs at least a couple more half percentage point interest rate hikes, with more on tap if price pressures fail to cool.

The MSCI world equity index, which tracks shares in 50 countries, was up 1%.

On Wall Street, the S&P and the Dow reversed their earlier session losses and were trading higher, led by technology, consumer discretionary, communication services and financials.

The S&P 500 gained 1.8%, while the Nasdaq Composite gained 2.68%. The Dow Jones Industrial Average rose1.29%. Tesla, Nvidia and Meta Platforms each rose sharply, fueling gains in the S&P 500 and Nasdaq.

Nearly all of the 11 S&P 500 sector indexes climbed, led by consumer discretionary and communication services .

The S&P/TSX Composite Index gained 1.5%.

Oil prices edged higher after U.S. crude inventories fell more than expected amid high demand for fuel and OPEC+ agreed to boost crude output to compensate for a drop in Russian production.

Brent futures rose 1.32% to $117.83 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 1.5% to $117.

The U.S. dollar eased across the board, ceding some of the ground gained in recent sessions as firmer risk sentiment prompted investors to reach for higher-yielding currencies.

The dollar index fell 0.76%, with the euro up 0.91% to $1.0743.

Gold prices rose over 1%, supported by a dip in the dollar and the U.S. private payrolls data. Spot gold rose 1.2% to $1,868.04 an ounce, while U.S. gold futures gained 1.24% to $1,866.10 an ounce.