NEW YORK (Reuters) – The S&P 500 closed higher on Wednesday for the ninth time in the past 10 sessions, with defensive and value stocks taking their turns to lead the gains after data showed U.S. private payrolls expanded last month, but at a much slower pace than expected.
The indexes hit session highs in the last hour of trading after losing ground briefly following the Federal Reserve’s “Beige Book” report which showed a modest increase in activity for U.S. businesses and an increase in employment through late August, while economic growth remained sluggish in parts of the country.
The blue-chip Dow edged closer to its Feb. 12 record high while the tech-heavy Nasdaq, now well over 20% above its pre-crisis high, rose at a slower pace on Wednesday.
While much of the rally from March lows has already been fueled by Federal Reserve support, Lindsey Bell, chief investment strategist at Ally Invest, said investors may still be digesting the central bank’s policy announcement last week which indicated continued support.
“What you’re seeing today is a bit of a rotation after yesterday’s blockbuster day,” said Bell. “Unless you really think tech is going to completely crash it can take a breather and allow some of the other value-oriented and cyclical sectors to take the reins for a while.”
The defensive utilities, consumer staples and real estate, which have trailed the broader market this year, were some of the biggest gainers among major S&P sectors on Wednesday.
Financials, a value sector which has also sharply underperformed this year, also gained on Wednesday.
Unofficially, the Dow Jones Industrial Average rose 452.74 points, or 1.58%, to 29,098.4, the S&P 500 gained 53.96 points, or 1.53%, to 3,580.61 and the Nasdaq Composite added 116.78 points, or 0.98%, to 12,056.44.
U.S. private payrolls increased last month from July, according to the ADP report, but fell short of economists’ forecast. Investor focus will now be on the government’s comprehensive employment report which is slated for Friday.
Janet Walker, senior portfolio manager at Abbot Downing in San Francisco, expects Friday’s government payroll numbers to also reflect a stalling from July to August. As a result she says it will be important for U.S. lawmakers to reach an agreement for a new fiscal coronavirus relief bill.
Weakness in the jobs report “could become a bigger risk if there’s a delay in stimulus,” she said. “For us to continue to recover we’re going to need to see additional stimulus.”
Nvidia Corp, the best-performing S&P 500 constituent this year and one of the benchmark’s biggest boosts on Wednesday, gained after several brokerages hiked their price targets on its shares after its announcement of powerful gaming chips in collaboration with Micron Technology Inc and Samsung Electronics Co Ltd.