US Stocks Advance as Traders Weigh Mixed Reports: Markets Wrap

(Bloomberg) -- US stocks snapped a two-day slide to rally ahead of Friday's nonfarm payroll report, as traders expect to see cooler labor demand, which could alleviate some inflation concerns.

The S&P 500 rose 1.8%, led by gains in consumer discretionary, while the tech-heavy Nasdaq 100 added 2.8%. Microsoft Corp. erased earlier losses that came after it pared its outlook on the impact from a strong dollar. Treasuries were steady, with US 10-year yields reaching 2.91%.

“Outside of this recent rally, very little about this market has changed from a technical standpoint and that makes us wary of calling the all-clear,” said Scott Brown, technical market strategist at LPL Financial. “We believe a slight lean toward defensive sectors and away from the growth-oriented areas of this market still make sense.”

Earlier, markets lacked clear direction as traders mulled private hiring data, which showed the smallest gain since the pandemic recovery began, and factory orders, which came in lower than forecast. Federal Reserve Vice Chair Lael Brainard also said it's hard to see a case for a September pause in rate hikes and that increases of 50 basis points in June and July seemed reasonable.

“Fed-friendly ADP and factory orders reports combined with a rational reaction to the Microsoft FX guide has investors feeling more constructive,” said Art Hogan, chief market strategist at National Securities. “Add to all of that OPEC+ is increasing quotas, which will certainly help all of our No. 1 concern, inflation.”

OPEC+ agreed to increase the size of its oil-supply hikes by about 50% in July and August, bending to pressure by major consumers including the US to fill the gap created by sanctions on Russian supplies. Lower oil prices could ease inflationary pressures. Yet investors remain on edge as some fear the pace of monetary tightening could throw the economy into a recession. WTI crude oil gained 2% after earlier losses.

Market participants believe the Fed will “continue to lower the balance sheet but be patient on raising interest rates as they see the economic data points come in,” Chad Morganlander, senior portfolio manager at Washington Crossing Advisors, said by phone. “That wait-and-see bias is one of the reasons why the market overall has rallied off the bottom in such a substantial way, and you're seeing the follow-through in that trade today.”

Among individual stock moves, Tesla Inc., Nvidia Corp. and Amazon.com Inc. led gainers by value. Hewlett Packard Enterprise Co. was down after lowering its profit forecast on supply issues.

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Here are some key events to watch this week:

US May employment report Friday
The UN's Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday

Some of the main moves in markets:

Stocks