Hopeful economic signs send stocks higher, bond prices lower

NEW YORK—Encouraging signs on hiring and growth in the service sector are sending U.S. stock indexes to record highs and bond prices sharply lower Wednesday. The yield on the benchmark 10-year Treasury note spiked to its highest level in more than seven years. That helped send bank stocks sharply higher. Technology companies are also rising.
A survey by payroll processor ADP showed strong hiring by private businesses in September, and a trade group said services firms produced more and hired more workers. Both reports suggest the economy is in good shape in spite of rising interest rates, oil prices, and the trade dispute between the U.S. and China.
GM climbed after Honda said it would invest in the company’s self-driving vehicle business. European stocks rose after the Italian government said it will gradually reduce its deficits over the next few years.
KEEPING SCORE: The S&P 500 index jumped 12 points, or 0.4 per cent, to 2,936 as of 1:45 p.m. Eastern time and is on track for a record high. The Dow Jones Industrial Average, which finished at an all-time high Tuesday, gained 147 points, or 0.6 per cent, to 26,921. The Nasdaq composite added 50 points, or 0.6 per cent, to 8,049.
Smaller companies rose much more than the rest of the market. The Russell 2000 index rose 17 points, or 1.1 per cent, to 1,673. Those companies, which tend to be more focused on the U.S. market than large multinationals, stand to benefit more from strong economic growth in the U.S. The Russell has fallen since the end of August as investors have grown less worried about trade tensions between the U.S. and other countries.
THE ECONOMY: Private businesses in the U.S. added 230,000 jobs in September, according to ADP. That’s the biggest total in seven months. Hiring was strong in most major industries. The federal government will release a report Friday that covers hiring by private businesses and also by governments.
A trade group said U.S. services firms produced more, hired more workers, and took more orders in September, and all of those things happened at a faster pace than in the month before. The Institute for Supply Management’s services index rose to its highest level in about a decade.
Bond prices dropped sharply. The yield on the 10-year Treasury note rose to 3.14 per cent, its highest since July 2011. That helped banks, which are able to charge higher interest rates on long-term loans when bond yields rise. Comerica rose 2.4 per cent to $91.94 and Bank of America added 1.6 per cent to $30.07.
Industrial and technology companies also climbed. Apple jumped 1.5 per cent to $232.71 and Intel rose 2.3 per cent to $49.20 while Boeing gained 1.6 per cent to $392.94 and Caterpillar added 2.4 per cent to $158.56.
GM FUELS UP: General Motors rose 3 per cent to $34.29 after Honda agreed to invest $2.75 billion in GM’s autonomous vehicle business over the next 12 years. Honda lost 3.4 per cent to $29.42. Japanese technology firm SoftBank said in May that it would pay $2.25 billion for a 20 per cent stake in the GM business, which is called Cruise.
GM is often seen as the company in second place in the race to get autonomous cars on the market, trailing Google’s Waymo unit.
OVERSEAS: Stocks in Europe rose after Italy’s economy minister backed down on spending plans that would keep the country’s deficit at an elevated level for three years. That relieved investors who were worried about Italy’s debts and the possibility of tensions between the country and the European Union.
The FTSE MIB in Italy gained 0.8 per cent after dropping 5 per cent over the previous five days. Italian government bond prices climbed and the yield on the 10-year bond fell sharply, to 3.30 per cent from 3.44 per cent. That followed sharp rises in the yield over the past three days.
The CAC 40 in France rose 0.4 per cent while the FTSE 100 in Britain rose 0.5 per cent. German markets were closed for a holiday.
HEAVY METAL: Century Aluminum tumbled after Norsk Hydro said it is shutting down its Alunorte plant in Brazil. Alunorte is the world’s largest alumina refinery, and that could leave Century Aluminum without enough of a critical material used in making aluminum. Century Aluminum fell 9.7 per cent to $10.74, and shares of Norsk Hydro lost 11.8 per cent in Norway.
Rival aluminum producer Alcoa, which produces its own alumina, rose 3.6 per cent to $43.07.
SLEEPING EASY: Tempur Sealy jumped 11.9 per cent to $54.16 after Reuters reported that rival Mattress Firm might file for bankruptcy protection as soon as this week.
IN FOR A PENNEY: J.C. Penney climbed 9.6 per cent to $1.71 after it named Jill Soltau, the president and CEO of fabric and crafts company Jo-Ann Stores, as its next CEO. Soltau will start at Penney in mid-October. Its previous CEO, Marvin Ellison, stayed for less than four years before leaving to became CEO of home improvement chain Lowe’s.
Penney’s stock is down 45 per cent in 2018, and has plunged almost 80 per cent in the past five years.
ENERGY: Benchmark U.S. crude fell jumped 1.1 per cent to $76.02 a barrel in New York. U.S. crude has hit four-year highs this week. Brent crude, used to price international oils, rose 1.3 per cent at $85.90 a barrel in London.
CURRENCIES: The dollar rose to 114.35 yen from 113.69 yen. The euro fell to $1.1521 from $1.1545.
ASIA’S DAY: Asian stocks fell as traders worried about by rising oil prices and weak economic data in Japan. Japan’s benchmark Nikkei 225 fell 0.7 per cent and Hong Kong’s Hang Seng dropped 0.1 per cent.