U.S. stocks made a winning start to the month on Thursday, as investors look ahead to the release of the monthly jobs report, after the pace of private sector jobs growth surged in May while manufacturing activity topped market expectations.
Expectations that the Federal Reserve would hike its benchmark rate in June soared to its highest level on Thursday, following the release of mostly upbeat U.S. economic data.
Private employers added 253,000 jobs in May, according to payroll processor ADP, well above Wall Street expectations of a 185,000 rise.
In a separate report, U.S. manufacturing activity ticked higher, hitting 53.5 in May, the Institute for Supply Management (ISM) said on Thursday. Economists had expected a rise to 52.8.
A reading above 50 indicates that the manufacturing economy is generally expanding; below 50 indicates that it is generally contracting.
Meanwhile, spending in the construction sector fell 1.4% for the month, the biggest drop in a year, and below forecasts of a 0.2% decline.
The nonfarm payrolls report on Friday is expected to show that the U.S. economy created 185,000 jobs last month, and will be closely watched as it is the final jobs report before the Federal Reserve Open Market Committee (FOMC) meets in June.
Labor market conditions and the pace of inflation are two measures that the Federal Reserve considers in its decisions concerning monetary policy.
According to investing.com’s Fed rate monitor tool, nearly 90% of traders expect the Fed to hike its benchmark rate in June from 0.75-1% to 1-1.25%.
U.S. carmakers added to positive sentiment after the majority of carmakers reported sales that were better than analysts had forecast. General Motors Company (NYSE:GM) was the only carmaker, among the top 3, to report sales figures that fell below expectations.
In other news, crude futures pared nearly most of their gains, settling just above break-even, after a bigger than expected draw in U.S. crude inventories was offset by an announcement from President Donald Trump that the U.S. is withdrawing from the 2015 Paris climate agreement.
On the New York Mercantile Exchange, crude futures for June delivery rose 4 cents to settle at $48.36 a barrel.
The Dow Jones Industrial Average notched 135 points to close at 21,144.18. The S&P 500 closed 0.76% higher while the Nasdaq Composite closed at 6246.83, up 0.78%.
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