Wall Street stocks climbed on Thursday after data showing US services-sector activity at a three-year low fuelled expectations that the Federal Reserve would cut interest rates to stem a wider economic downturn. Microsoft rose 1.2 per cent and Facebook added 2.7 per cent, with the two contributing more than any other companies to the S&P 500’s gain.

The market dropped after the Institute for Supply Management (ISM) said its non-manufacturing activity index fell to a reading of 52.6 in September, the lowest since August 2016. That added to fears sparked on Tuesday when a report showed US factory activity contracted to its lowest level in more than a decade, as well as data on Wednesday showing private payrolls growth in August was not as strong as previously estimated.

Stock prices bounced back from the dour economic data as bets on a third US rate cut this year at Fed’s October policy meeting surged to 90 per cent from 40 per cent, according to CME Group’s Fed Watch tool. Traders are again expecting at least two more rate reductions by the end of 2019, which they had abandoned after the central bank described each of its last two rate cuts as a “mid-cycle adjustment.”

A pivotal jobs report on Friday may contribute more evidence of whether the US-China trade war is pushing the world’s largest economy toward a recession. The Dow Jones Industrial Average rose 0.47 per cent to end at 26,201.04, while the S&P 500 gained 0.80 per cent to 2,910.63.

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