By IFCMarkets
US stocks advanced on Tuesday after weak US service sector report was deemed as possibly delaying an expected interest rate hike by the Federal Reserve. The dollar weakened. The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.9% to 94.852, largest daily decline in a month.
The Dow Jones industrial average rose 0.3% to 18538.12 led by Chevron and Boeing which closed more than 1% higher. Losses in Nike, United Technologies Corporation, Home Depot and General Electric limited the gain in the blue chip index. The S&P 500 closed 0.3% higher as 2186.48 led by energy, utilities and telecom stocks. The Nasdaq index gained 0.5% settling at 5260.08. The Nonmanufacturing Index of the Institute for Supply Management fell to 51.4 in August from 55.5 in July, the slowest pace of growth since 2010. The slowing of economic activity in service sector was another weak report which supported the case of no rate hike at Federal Reserve’s September meeting after weaker than expected jobs report on Friday. Investors continue buying risky stocks despite high stock valuations given the alternative of low yields on safe assets. The slipping of the Fed’s labor-market conditions index to minus 0.7 in August after a positive reading of 1.3 in July, the seventh negative reading in the past eight months, was another negative development for the likelihood of a rate hike soon. Market participants are pricing in a 15% chance of a rate hike at the Fed’s September 20-21 policy meeting, down from 30% before the ISM report on Tuesday, according to the CME Group’s FedWatch tool. Today at 13:00 CET Mortgage applications will be released by the Mortgage Bankers’ Associations in US. At 16:00 CET July Job Openings and Labor Turnover Summary results will be published. At 20:00 CET Federal Reserve Beige Book will be released. At 16:00 CET the Bank of Canada Interest Rate decision will be released. The Bank is expected to leave the rates unchanged at 0.5%.
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