The dollar gained and stocks on Wall Street mostly rose yesterday after US private sector hiring surged in February, underscoring the economy’s strength and adding to expectations the Federal Reserve will raise interest rates next week.
The ADP National Employment Report showed private payrolls grew by 298,000 jobs last month, well above economists’ expectations for a gain of 190,000. January’s private payrolls gains were revised up to 261,000 from 246,000.
The report raised expectations of a robust US Labour Department report for February payrolls on Friday.
Traders now see an 88.6 percent chance the Fed will raise rates by 25 basis points at its policy-setting meeting on March 15, up from 81.9 per cent on Tuesday, according to the CME Group’s FedWatch tool.
European stocks rose and a gauge of global equity markets pared most losses on the ADP report. But tumbling crude prices pushed down oil giants Exxon Mobil, Chevron and ConocoPhillips, among other energy companies.
The pan-European STOXX 600 index closed up 0.13 per cent after declining the four previous sessions. MSCI’s all-country world stock index was off 0.22 per cent.
The likelihood the Fed will raise rates has not spooked investors, unlike the “taper tantrum” of 2013, because they perceive the economy is strong enough to withstand a rate hike and they see the need for a more normalised monetary policy.
“Even if the Fed raises rates next week, it would be to 75 basis points which is historically very low and is still considered very easy money,” said Adam Sarhan, chief executive of 50 Park Investments in Orlando, Florida.
The benchmark S&P 500 and Nasdaq composite indexes rose, while the Dow industrials fell, pulled lower by energy and Caterpillar Inc, under government scrutiny for alleged tax fraud, according to The New York Times.
The Dow Jones Industrial Average fell 12.2 points, or 0.06 percent, to 20,912.56. The S&P 500 gained 1.77 points, or 0.07 percent, to 2,370.16 and the Nasdaq Composite added 21.96 points, or 0.38 percent, to 5,855.89.
The dollar rose to its highest level in five days, just below a two-month peak, while the euro fell to a five-day low after the payrolls data and ahead of a meeting of the European Central Bank on Thursday.
Traders and investors expect the ECB to maintain its loose monetary policy despite rising inflationary pressures.
The dollar has rallied by about 2.5 per cent against a basket of major trading currencies over the past five weeks.
The dollar index gained 0.25 per cent at 102.060. The dollar rose 0.39 per cent against the Japanese currency to 114.41 yen and it edged up 0.16 per cent to $1.0548 versus the euro.