Stock market today: S&P 500, Nasdaq hit fresh highs as stocks head into holiday with a bang

Stocks surged to new highs on Wednesday’s holiday-shortened session, driven by investor optimism for a potential rate cut in September. Despite weak economic data, both the S&P 500 and Nasdaq achieved fresh records, reflecting a bullish sentiment in the market. The S&P 500 rose approximately 0.5%, reaching a new high of 5,537, while the tech-heavy Nasdaq Composite climbed around 0.9%. However, the Dow Jones Industrial Average saw a slight dip, dropping roughly 0.1%.

This optimism emerged following reports that the US services sector contracted in June at the fastest pace in four years. Additionally, private-sector job creation slowed for the third consecutive month, with the US adding just 150,000 new jobs in June, falling short of the 165,000 expected by Wall Street. Pay gains for both job stayers and job changers also slowed, contributing to the overall weak economic outlook.

Traders are now pricing in a 74% chance of a rate cut in September, according to CME’s FedWatch tool. This expectation is further supported by a drop in yields, with the 10-year Treasury yield falling roughly 8 basis points to trade near 4.35%. The stock market rally came ahead of the Independence Day holiday, with trading expected to resume with heightened volatility due to the upcoming jobs report.