Wall St rebounds as rate-cut hopes temper shutdown worries

By Niket Nishant and Sukriti Gupta

(Reuters) -The main U.S. stock indexes bounced back from early lows on Wednesday after weaker-than-expected private payrolls data boosted expectations for a central bank rate cut this month, allaying anxiety around the federal government shutdown.

Traders sharply increased bets on a 25-basis-point interest-rate cut from the U.S. Federal Reserve at its next meeting after the ADP National Employment Report showed private payrolls dropped the most in two-and-a-half years in September.

"While the ADP report is a volatile set of data, it may be the only employment data that you have for quite a while," said Arnim Holzer, global macro strategist at Easterly EAB.

"And today's relatively negative set of data is probably outside of what the Fed would have liked to have seen."

At 11:59 a.m. the Dow Jones Industrial Average rose 76.92 points, or 0.17%, to 46,474.81, the S&P 500 gained 7.49 points, or 0.11%, to 6,695.95, and the Nasdaq Composite added 30.37 points, or 0.13%, to 22,690.38.

The S&P 500 healthcare sector logged its strongest four-day rally since October 2022. Pfizer, Eli Lilly and Amgen advanced 5.4%, 6.5%, and 6.5%, respectively, and were among the top performers on the benchmark index.

Pfizer and U.S. President Donald Trump said on Tuesday they had cut a deal in which the drugmaker agreed to lower prescription drug prices in the Medicaid program - compared to its charges in other developed countries - in exchange for tariff relief.

The S&P 500 tech sector rose 0.39%. Micron Technology and Broadcom rose 6.7% and 1.9%, respectively, while Apple edged 0.5% higher. The gains also supported the Nasdaq.

GOVERNMENT SHUTDOWN

After trading lower for most of the premarket session on shutdown concerns, investors soon found their footing.

"The market has become a little bit inured to the shutdown drama," Holzer said.

Markets have historically been resilient during government shutdowns. The S&P 500 rose during each of the last six, according to a note from Deutsche Bank.

However, other analysts warned that a prolonged shutdown could prove a drag. In the seven instances when such shutdowns lasted 10 days or longer, the S&P 500 fell four times and rose thrice, according to Vanguard.

Data from the Institute for Supply Management showed U.S. manufacturing edged toward recovery in September.

Such readings carry added weight now, with government data such as the nonfarm payrolls report that was scheduled for Friday expected to be delayed.

Investors will also parse commentary from Richmond Fed president Thomas Barkin.

In other stocks, AES gained 16.3%, topping the S&P 500 and boosting the S&P 500 utilities sector after the Financial Times reported that BlackRock-owned Global Infrastructure Partners was nearing a $38-billion deal to acquire the utility group.

Corteva said it would separate its seed and pesticide businesses into separate publicly traded companies. It was at the bottom of the S&P 500 after its shares fell 7.4%.

Advancing issues outnumbered decliners by a 1.56-to-1 ratio on the NYSE and by a 1.2-to-1 ratio on the Nasdaq.

The S&P 500 posted 28 new 52-week highs and six new lows, while the Nasdaq Composite recorded 88 new highs and 50 new lows.

(Reporting by Niket Nishant and Sukriti Gupta in Bengaluru; Editing by Mrigank Dhaniwala, Ros Russell and Pooja Desai)