Reports on Economy Were Weaker Than Expected

Wall Street's big recent rally lost some momentum on Wednesday following a pair of potentially discouraging reports on the economy.

• The S&P 500 rose, or less than 0.1%, to 5,970.81.
• The Dow Jones Industrial Average fell 91.90 points, or 0.2%, to 42,427.74.
• The Nasdaq composite rose 61.53 points, or 0.3%, to 19,460.49.

The action was stronger in the bond market, where Treasury yields tumbled following the weaker-than-expected reports on the economy. The reports on the job market and output by US services businesses raised expectations for coming cuts to interest rates by the Federal Reserve, the AP reports.

One report said that activity contracted for US retailers, finance companies, and other businesses in the services industries last month, when economists were expecting to see growth. Businesses told the Institute for Supply Management in its survey that all the uncertainty created by tariffs is making it difficult for them to forecast and plan. A second report suggested US employers outside of the government hired far fewer workers last month than economists expected. The report from ADP said private employers hired just 37,000 more workers than they fired, down from the prior month's 60,000. That could bode ill for Friday's more comprehensive jobs report coming from the US Labor Department.

Following the reports, traders built up bets that the Federal Reserve will need to cut interest rates later this year in order to prop up the economy, which in turn caused the fall for Treasury yields. The weaker-than-expected ADP report also pushed Trump to call on Fed Chair Jerome Powell to deliver cuts to rates more quickly. "'Too Late' Powell must now LOWER THE RATE," Trump said on his Truth Social platform. "He is unbelievable!!!" The Fed has yet to cut interest rates this year after slashing them through the end of 2024. Part of the reason for the pause is that the Fed wants to see how much Trump's tariffs will hurt the economy and raise inflation.

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On Wall Street, some companies that benefit from lower interest rates rallied after Treasury yields fell. Homebuilders DR Horton, PulteGroup, and Lennar all rose more than 3%. Lower 10-year Treasury yields typically mean lower interest rates for mortgages, which can juice the homebuilding business. Hewlett Packard Enterprise rose 0.8% after delivering a stronger profit for the latest quarter than analysts expected. CrowdStrike, the cybersecurity company that Delta Air Lines sued over a technology outage last summer, fell 5.8% despite reporting a stronger profit than expected. Its revenue fell just short of Wall Street's target, as did its forecast for revenue in the current quarter. (More stock market stories.)