S&P 500 ends sharply higher, jobs data fuels interest rate optimism

FILE PHOTO: A Wall Street sign outside the New York Stock Exchange

By Shristi Achar A and Noel Randewich

(Reuters) - Wall Street ended sharply higher on Tuesday, lifted by Tesla, Nvidia and other megacap growth stocks after a drop in monthly job openings cemented expectations of a pause in interest rate hikes by the U.S. Federal Reserve.

The S&P 500 logged its strongest one-day gain since June 2, while the Nasdaq notched its strongest session since July 28, and both indexes closed at more than two-week highs.

The sharp gains came after the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed the number of job openings stood at 8.827 million in July, falling for the third straight month and signaling easing labor market pressures.

Investors also parsed a report from the Conference Board showing consumer confidence in the United States fell to 106.1 in August, compared with expectations of 116.

Interest rate futures signaled an 87% chance the Fed will keep rates steady at its September meeting and a 54% chance it will keep rates on hold through November, according the CME Group's FedWatch tool.

"Investors are of the mindset that 'You know what, maybe interest rate hikes are indeed behind us. So let's buy back into stocks,'" said Sam Stovall, chief investment strategist at CFRA Research.

The yield on the 10-year Treasury note eased to 4.11%, while that on the two-year note fell back below 5% after hovering around that level for the past few sessions.

The decline in yields supported growth stocks, with Nvidia climbing 4.2% to close at its highest ever.

Tesla rallied 7.7%, even after documents showed a U.S. regulator sent a special order to the electric vehicle maker asking questions about changes to the driver monitoring system for its Autopilot software.

Nvidia and Tesla led in turnover on Wall Street, with over $33 billion traded in each stock.

Alphabet received a 2.7% boost from a swath of fresh artificial-intelligence technology and partnerships unveiled by the Google-parent.

The S&P 500 climbed 1.45% to end the session at 4,497.63 points.

The Nasdaq gained 1.74% to 13,943.76 points, while Dow Jones Industrial Average rose 0.85% to 34,852.67 points.

Volume on U.S. exchanges was relatively light, with 10.0 billion shares traded, compared to an average of 10.7 billion shares over the previous 20 sessions.

All 11 S&P 500 sector indexes rose, led by communication services, up 2.46%, followed by a 2.35% gain in consumer discretionary.

The July non-farm payrolls report on Friday will offer investors more clarity about the state of the labor market. Focus will also be on the personal consumption expenditures index, the Fed's preferred inflation gauge, which is due on Thursday.

Lack of hawkish surprises in Fed Chair Jerome Powell's comments at the Jackson Hole symposium last week buoyed stocks on Monday, with the focus now on the upcoming economic data to gauge how long the central bank could keep interest rates elevated.

Catalent jumped almost 5% after the contract drugmaker reached a settlement with activist investor Elliott Investment Management to conduct a review.

Verizon and AT&T each gained more than 3% after Citi upgraded the telecom companies to "buy" from "neutral".

U.S.-listed shares of PDD Holdings rallied over 15% after the Chinese e-commerce firm beat second-quarter revenue estimates.

Advancing issues outnumbered falling ones within the S&P 500 by a 8.2-to-1 ratio.

The S&P 500 posted 21 new highs and two new lows; the Nasdaq recorded 52 new highs and 115 new lows.

(Reporting by Shristi Achar A and Amruta Khandekar in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta and Deepa Babington)