Stocks jumped in afternoon trading today as Wall Street has attempted to rebound from yesterday’s sharp sell-off that saw the Dow drop 470 points and fall back into “correction territory”. Investors were encouraged by positive economic reports that hinted to decent private sector job gains and an upward revision in worker productivity in the second quarter.
The Dow Jones Industrial Average was up 195 points (1.2%) at 1:05 PM ET, recouping a portion of Tuesday’s 2.8% drop. The Standard & Poor’s 500 index gained 20 points, (1.1%), after dropping 58 points the previous session. The Nasdaq composite index gained some 60 points (1.3%). Yesterday’s nosedive came in the aftermath of a difficult August on Wall Street, that saw the S&P 500’s worst monthly performance in three years. This recent downturn has been blamed on market volatility in China and a pending rate hike from the Fed that’s expected to occur as soon as this month.
Several economic reports released earlier today have provided evidence that the US economy has kept on trucking in spite of fears of economic stagnation in China. According to payroll processor ADP, businesses have added some 190,000 jobs in August. Economists surveyed by Bloomberg have expected gains of some 218,000 jobs. Worker productivity growth was revised sharply higher for the second quarter, thanks to falling labor costs. Productivity rose at a 3.3% annual rate, higher than the initial estimate of 1.3% and a sharp rebound from the first quarter’s 1.1% drop.
As the Federal Reserve considers raising interest rates, the jobs picture is revealing itself as an important data point. Economists are divided on whether they’ll raise rates at their next meeting later on in the month. Outside of manufacturing, the domestic activity data is very strong. However, Fed officials seem to be worried about things in China slowing down. Overseas, the Shanghai Composite lost .2% today on the last day of trading before a two-day holiday commemorating victory in World War II. This was a relatively small slide, especially when compared to the index’s recent drops, which have often been upwards of 2%. Analysts believe that the Chinese government has been directing state-owned agencies to buy up stocks in order to prop up prices and stop the slide.
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