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Stocks rebound from sell-off as the odds of another Fed rate cut improve

Federal Reserve
The Federal Reserve in Washington. Discouraging economic data this week has increased expectations that the Fed will cut interest rates at the end of October.
(J. Scott Applewhite / Associated Press)

Technology and healthcare companies helped U.S. stocks rebound broadly from an early sell-off Thursday, snapping the market’s steep two-day skid.

The Dow Jones industrial average swung from a loss of more than 330 points to a gain of more than 120 after another disappointing economic report raised expectations among investors that the Federal Reserve will cut interest rates again to help keep the U.S. economy growing. The S&P 500 and Nasdaq also recovered from the early rout.

The S&P 500 index rose 23.02 points, or 0.8%, to 2,910.63. The Dow gained 122.42 points, or 0.5%, to 26,201.04. The Nasdaq, which is heavily weighted with technology stocks, climbed 87.02 points, or 1.1%, to 7,872.26. The Russell 2000 index of small-company stocks gained 6.72 points, or 0.5%, to 1,486.35.

Investors continued to shift money into the relative safety of U.S. bonds. That drove bond prices higher, lowering their yields. The yield on the 10-year Treasury fell to 1.54% from 1.59% late Wednesday.

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Traders were jolted by surprisingly slow growth in the U.S. services sector last month. The Institute for Supply Management, an association of purchasing managers, said that its nonmanufacturing index sank to 52.6 from 56.4 in August. Readings above 50 signal growth, but September’s figures are the lowest since August 2016.

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On Tuesday, a private index of U.S. manufacturing output dropped to its lowest level since the recession year of 2009.

The discouraging economic data this week has shifted investors’ expectations of further interest rate cuts by the Federal Reserve. The central bank has lowered rates by a quarter-percentage point twice this year in a bid to shield the economy from slowing growth abroad and the effects of the trade war. The odds that the Fed will cut rates again at the end of this month are now running above 88%, according to the CME Group.

Given the recent spate of downbeat economic data, all eyes will be on the federal government’s September job market snapshot, due out Friday. The Labor Department is expected to report that U.S. employers added 145,000 jobs last month, up from 130,000 in August, according to analysts polled by FactSet.

Solid gains by Microsoft, which climbed 1.2%, helped drive the technology sector higher Thursday. Healthcare, communication services and industrial stocks also helped power the market rebound. Pfizer rose 2.2%, Facebook gained 2.7% and Boeing rose 1.3%.

Tesla slid 4.2% after the electric car maker fell short of sales forecasts in the third quarter. The company delivered a record 97,000 vehicles, but fell short of the company’s own predictions.

GoPro plunged 19.2% after the camera maker cut its profit and revenue forecasts for the year because of production delays.

Benchmark crude oil fell 19 cents to settle at $52.45 a barrel. Brent crude oil, the international standard, added 2 cents to close at $57.71 a barrel.

Gold rose $6.10 to $1,507.10 per ounce and silver was unchanged at $17.59 per ounce.

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The dollar fell to 106.87 Japanese yen from 107.22 yen on Wednesday. The euro strengthened to $1.0973 from $1.0958.


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