By Chuck Mikolajczak
NEW YORK (Reuters) -Global stocks rose on Tuesday and were on pace for a third straight session of gains, as investors remained optimistic the U.S. Federal Reserve would cut interest rates at its December meeting, while U.S. Treasury yields declined.
On Wall Street, U.S. stocks were higher, led by gains in Alphabet, and Meta Platforms. The Google parent hit an intraday record high of $328.83 and was last up more than 1% as it approached $4 trillion in market capitalization, which would make it only the fourth company to reach that mark. The Information reported that Meta Platforms, which rose about 3% as the biggest boost to the S&P 500, was in talks with Google to spend billions of dollars on the Alphabet-owned company’s chips for use in its data centers starting from 2027.
Investors also parsed a flurry of economic data, some of which was delayed due to the 43-day U.S. government shutdown.
Retail sales rose 0.2% in September after an unrevised 0.6% gain in August, the Commerce Department said, short of the 0.4% rise expected by economists polled by Reuters.
A separate report from the Labor Department showed the Producer Price Index for final demand increased 0.3% after an unrevised 0.1% drop in August, which matched expectations, as the cost of energy goods surged and producers passed on some tariffs.
More recent data on Tuesday from ADP said U.S. private employers shed an average of 13,500 jobs during the four weeks ending Nov. 8.
The Dow Jones Industrial Average rose 546.82 points, or 1.18%, to 46,995.09, the S&P 500 rose 45.45 points, or 0.68%, to 6,750.53 and the Nasdaq Composite rose 80.42 points, or 0.35%, to 22,952.43.
Equities have been rallying since Friday after New York Fed President John Williams said interest rates can fall in the near term even as other policymakers insisted borrowing costs should remain steady for now, which boosted market expectations for a rate cut. Those expectations were further juiced on Monday after comments from San Francisco Federal Reserve Bank President Mary Daly and Fed Governor Christopher Waller in support of a December cut.
“We’ve had more coalescing just in the last couple of days around rate cut odds, that’s fluctuated dramatically in the last week,” said Bill Merz, head of capital market research at U.S. Bank Wealth Management in Minneapolis.
“And we have data this morning, again, with slightly softer labor markets, that should be a key consideration for Fed voting members, and I think it is. So those slightly soft labor markets corroborate that it wasn’t just a blip, but that’s persisting.”
Trading volume is likely to dwindle towards the U.S. Thanksgiving holiday on Thursday, when markets will be closed, and have an abbreviated session on Friday.
MSCI’s gauge of stocks across the globe rose 7.72 points, or 0.79%, to 990.03 and is on track for its biggest three-day percentage gain in a month. The pan-European STOXX 600 index closed up 0.91%, lifted by the prospect of a Fed rate cut and optimism over a potential ceasefire in Ukraine.
U.S. yields were lower after the glut of data, with the yield on benchmark U.S. 10-year notes down 3.8 basis points to 3.998% as it fell below the 4% mark for the first time since October 29.
Markets are pricing in an 84.7% chance for a 25 basis-point cut from the Fed at its December meeting, up slightly from the 84.4% in the prior session and well above the 50.1% from a week ago.
Federal Reserve Governor Stephen Miran said in a television interview that a deteriorating job market was happening because of where the central bank has set its short-term interest rate target.
In currencies, the dollar index, which measures the greenback against a basket of currencies, fell 0.48% to 99.72, with the euro up 0.49% at $1.1577.
Sterling strengthened 0.77% to $1.3204 ahead of Britain’s upcoming budget announcement on Wednesday, while traders piled into the options market seeking protection against heightened volatility.
Traders have been closely watching for signs of possible Japanese intervention in the yen, which strengthened 0.64% against the greenback to 155.93 per dollar but is down 1.3% for the month.
U.S. crude fell 1.61% to $57.89 a barrel and Brent declined to $62.40 per barrel, down 1.53% after Ukraine signaled support for a U.S.-backed framework for ending the war with Russia,
(Reporting by Chuck Mikolajczak; additional reporting by Scott Murdoch in Sydney and Amanda Cooper in LondonEditing by Frances Kerry and Nick Zieminski)
