(Reuters) – Wall Street was higher in late morning trading on Wednesday as upbeat data pointed to strength in the economy.
The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.3 percent last month after a 0.2 percent gain in June.
The data comes a day after a report showed GDP grew at its fastest pace in more than two years in the second quarter.
“The outlook for the U.S. and the global economy, remains relatively positive and most investors do not see a recession ahead,” said Michael Sheldon, chief investment officer of RDM Financial Group at High Tower.
“Given that backdrop, equity markets are likely to grind higher over the next few quarters and pullback are likely to be bought by investors.”
However, the core personal consumption expenditures (PC) price index – the Fed’s preferred inflation measure – increased 1.4 percent in the 12 months through July, its smallest year-on-year increase since December 2015.
Core PC has undershot the U.S. central bank’s 2 percent target for the past five years and could diminish expectations of an interest rate increase in December.
Chances of a rate hike in December have fallen to about 36 percent from 43 percent a month ago, according to the CME Group’s Fed Watch tool.
“The fact that inflation remains below the Fed’s 2 percent goal makes it tougher for (the Fed) to raise rates in the fourth quarter,” added Sheldon.
Labor Department data showed the number of Americans filing for unemployment benefits rose slightly last week even as the labor market continues to strengthen.
The weekly data precedes the more comprehensive monthly jobs report on Friday, which will help investors gauge the strength of the labor market as they look for clues on the Fed’s next move on rates.
Still, the S&P is on track to post a monthly loss for August, after four straight months of gains.
The Nasdaq Composite .IXIC was up 34.06 points, or 0.53 percent, at 6,402.37.
Nine of the 11 major S&P sectors were higher, with the health index’s .SPXHC 0.93 percent rise leading the advancers.
UnitedHealth <Unh. n> 0.7 percent gain provided the biggest boost to the Dow. The Nasdaq biotech index .NBI rose 1.4 percent, helped by a rise in Gilead (GILD.O), Celgene (CELG.O) and Biogen (BIIB.O).
Among stocks, Dollar General (DG.N) fell 8 percent after reporting a slide in second-quarter margins.
Shoe Carnival (SCVL.O) surged 26 percent after the footwear retailer’s revenue and profit beat estimates.
Advancing issues outnumbered decliners on the NYSE by 2,004 to 718. On the Nasdaq, 1,994 issues rose and 722 fell.
(The online version of the story corrects name of the financial services company in the fourth paragraph to RDM Financial Group.)
Reporting by Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty