Many believe the likelihood of another rate increase in March has faded because of recent signs of weakness in the global economy. That has sent the dollar lower against other currencies, a welcome change for U.S. exporters whose overseas sales have been hurt by the appreciation of the dollar over the last year and a half.
The Dow Jones industrial average rose 79.92 points, or 0.5 percent, to 16,416.58. The Standard & Poor’s 500 index rose 2.92 points, or 0.2 percent, to 1,915.45 and the Nasdaq composite rose 5.32 points, or 0.1 percent, to 4,509.56.
RATE RETHINK: Investors are getting ready for Friday’s payroll numbers. Economists surveyed by FactSet forecast that U.S. employers created 200,000 jobs in January and the unemployment rate held steady at 5 percent.
Over the past couple of weeks, investors have scaled back expectations that the Fed will continue raising interest rates amid signs that the global slowdown in growth is beginning to hurt the U.S. economy.
On Wednesday, the private ISM survey found U.S. services companies grew in January at the slowest rate in nearly two years. Fed fund futures, a security that allows investors to bet on which way the Fed will move interest rates, are indicating the next noticeable chance the Fed will raise rates is not until early 2017.
“The market is starting to price in a small chance of recession, not some realistic chance, but enough of a chance to give investors pause and reposition,” said Khoa Le, who co-heads a derivatives trading desk at Credit Suisse.
CURRENCIES: Diminished expectations of a March Fed rate hike have hit the dollar. The euro was up 0.8 percent at a three-month high of $1.12 while the dollar fell 1.1 percent to 116.78 yen.
Le said the large move in the dollar in recent days is partially related to a great unwinding of positions by both large investors and companies who might hold large amounts of currency overseas.
Many investors were “buying into this thesis of a strong dollar,” Le said. “Now that the Fed is less likely to raise rates, we are seeing clients reposition.”
OFF CAMERA: Mobile video camera maker GoPro plunged 87 cents, or 8 percent, to $9.84 after the company reported a wider-than-expected fourth quarter loss. GoPro shares are down 46 percent just in 2016.
RETIREMENT PARTY: CBS and Viacom shares were up 1 percent each after Viacom announced that its 92-year-old majority shareholder, Sumner Redstone, was stepping down as CEO to be replaced by CBS CEO Les Moonves.
ENERGY: Benchmark U.S. crude edged down 10 cents to $32.15 a barrel on the New York Mercantile Exchange. The contract jumped 8 percent on Wednesday in New York. Brent crude, a benchmark for international oil prices, fell 37 cents to $34.70 a barrel in London.
BONDS: U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 1.86 percent from 1.89 percent.