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NEW YORK: Wall Street climbed on Wednesday with investors optimistic about the Federal Reserve keeping interest rates unchanged later in the day, while a pullback in bond yields after the US Treasury Department’s refunding plans boosted megacap stocks.

The Fed’s policy announcement is expected at 1400 ET (1800 GMT) but investors will focus on Chair Jerome Powell’s conference after the statement to gauge how long the central bank could keep rates elevated.

A raft of economic data including a smaller-than-expected rise in October’s US private payrolls and a sharp contraction in manufacturing activity added to hopes that the central bank could refrain from tightening policy further this year.

“The ADP (private payrolls) number is indicative of an economy that isn’t collapsing, but still not overly strong, which plays into the thinking that the Federal Reserve is going to remain on hold,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

Traders’ bets of a 25-basis point rate hike in December slipped to 20.8% after the data from 28.8% the previous day, as per CME Group’s FedWatch tool.

Meanwhile, the Treasury Department said it will slow the pace of increases in its longer-dated debt auctions in the November-January quarter.

The yield on the benchmark 10-year note dropped below 4.8% for the first time in two weeks after the announcement.

“Yields are lower because the refinancing is not as much as people had feared. When the government has to borrow more money than what people are thinking, that creates problems for the bond market,” said Pavlik.

Megacap growth stocks including Microsoft, Nvidia and Amazon.com gained between 1.7% and 2.6%.

Seven of the 11 major S&P 500 sectors were trading higher, with information technology and communication services leading gains.

The Fed’s stance on interest rates will likely set the tone for US equities following a sharp fall in October due to a surge in Treasury yields, the Middle East conflict and mixed earnings reports.

CVS Health fell 2.7% after the health services company tempered its 2024 earnings forecast while Estee Lauder dropped 17.0% after the beauty products maker cut its annual profit outlook.

Overall, analysts expect earnings for S&P 500 companies to grow 5% in the third-quarter, per LSEG data.

Investors also assessed the Labor Department’s JOLTS report showing US job openings remained elevated in September.

At 11:44 a.m. ET, the Dow Jones Industrial Average was up 121.27 points, or 0.37%, at 33,174.14, the S&P 500 was up 23.07 points, or 0.55%, at 4,216.87, and the Nasdaq Composite was up 84.91 points, or 0.66%, at 12,936.15.

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