US stocks gain as investors eye more Fed rate hikes

• Stocks initially dove after the Institute for Supply Management said services sector activity in September fell to a three-year low.
• The Dow Jones Industrial Average finished at 26,202.60, up 0.5 percent, after swinging more than 450 points during the session.
• The Fed missed their September opportunity, but it is not necessarily too late to act forcefully in October.

NEW YORK: Following two straight days of routs on disappointing US economic data, Wall Street stocks pushed higher on Thursday as more weak data boosted expectations for the Federal Reserve to cut interest rate cuts.

Stocks initially dove after the Institute for Supply Management said services sector activity in September fell to a three-year low. The report came on the heels of jobs and manufacturing data this week that exacerbated recession fears.

But stocks quickly shook off that gloom as markets bet the Fed would step in, analysts said.

Futures markets now overwhelmingly expect an interest rate cut later this month after being divided on that question earlier in the week.

The Dow Jones Industrial Average finished at 26,202.60, up 0.5 percent, after swinging more than 450 points during the session.

The broad-based S&P 500 jumped 0.8 percent to 2,910.86, while the tech-rich Nasdaq Composite Index jumped 1.1 percent to 7,872.26.

FTN Financial's Chris Low, who has called for aggressive action from the Fed, said the weak ISM data on the services sector confirmed "serious" economic headwinds.

"The Fed missed their September opportunity, but it is not necessarily too late to act forcefully in October," Low said. "Keep kicking the can with timid policy responses for too long, however, and there will be a recession."

Among individual stocks, Tesla tumbled 4.2 percent after it released third-quarter auto deliveries that lagged analyst expectations and raised doubts about the company's prospects for meeting full-year targets.

PepsiCo rose three percent after it reported better third-quarter earnings than expected thanks in part to strong sales of Gatorade sports drinks.

Clorox dropped 1.5 percent as it slashed its profit and sales forecast, citing the hit from the strong dollar.

Retailers were mostly higher as the National Retail Federation projected holiday sales would rise between 3.8 percent and 4.2 percent this season due to solid employment trends and low gasoline prices.

Target, Best Buy and Nordstrom were among the companies that advanced.