The major domestic equity indexes closed well into positive territory on Wednesday on what amounts to, at best, hope that the Fed will cut interest rates if the private sector’s jobs data remains weak. There was also a degree of hope that the United States and Mexico would reach an agreement to avoid U.S. tariffs on Mexican goods.

The gains extended the rally on Tuesday when Fed Chairman Jerome Powell indicated the central bank may have to react to the U.S. trade wars, boosting rate cut hopes. Other Fed officials also hinted that a rate cut was possible.

The ADP National Employment Report on Wednesday further bolstered bets for a rate cut. According to the report, private employers hired at the slowest pace in more than nine years in May, weakness that is being blamed on heightening global trade tensions.

The data comes ahead of more comprehensive nonfarm payrolls data from the Labor Department due out on Friday.

There was also a degree of encouragement resulting from comments made by Trump that seem to imply that Mexico wants to reach a deal to stop a new trade war. A White House trade adviser and a senior Republican senator also said Washington might not introduce proposed tariffs.

The top gainers among the S&P 500’s 11 major sectors were real estate which ended up 2.3%, while utilities closed up 2.1% and consumer staples registered a 1.1% advance.

The technology sector rose 1.4% and provided the biggest boost to the market, helped by Apple Inc and Microsoft Corp. Salesforce advanced 5.1% after the cloud-based service provider forecast full-year results above expectations.

The energy sector slipped 1.1%, making it the only S&P sector in the red, as crude prices fell sharply.

Campbell Soup, the largest percentage gainer on the S&P 500, rose 10% after the canned soup maker raised its full-year earnings forecast.

Approximately 7.02 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.12 billion share average over the past 20 trading sessions.

Services Sector Sees Increased Activity

Activity in the services sector increased in May and industries hired more workers, offering some respite for an economy that is showing a degree of respite following a temporary boost from exports and an accumulation of inventories in the first quarter.

The survey from the Institute for Supply Management (ISM) on Wednesday followed a series of weak reports on consumer spending, housing and manufacturing that suggested a sharp loss of momentum in economic growth early in the second quarter.

Slowing growth, worsening trade tensions between the United States and China, and looming tariffs on goods imported from Mexico have led to a degree of expectation for a reduction in interest rates by the Fed later this year.

The ISM said its non-manufacturing activity index rose 1.4 points to a reading of 56.9 in May. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of domestic economic activity. 

The May increase in services industry activity reflected an increase of 1.7 points in the production sub index. Activity was also boosted by gains in the new orders measure.

A gauge of services industry employment surged 4.4 points to a seven-month high. The ISM said while businesses in the services sector were mostly optimistic about overall business conditions, “concerns remain about tariffs and employment resources.”

The ISM said 16 industries, including utilities, real estate, finance and insurance, healthcare and social assistance, information, and professional, scientific and technical services reported growth last month. The only industry reporting contraction was agriculture, forestry, fishing and hunting.

Businesses in the utilities industry said they were “waiting to see the impact of Chinese import tariff,” while their counterparts in the mining sector said because of the trade war, “it has been very difficult to plan in a long term ahead.”

The trade tensions and fading stimulus from the White House’s tax cuts and spending increases are slamming the brakes on the economy. The Atlanta Fed is forecasting gross domestic product to rise at a 1.3% annualized rate in the second quarter.

The economy grew at a 3.1% pace in the first quarter, lifted by increases in exports, inventories and defense spending. Goods exports fell sharply in April and the inventory overhang, which is mostly concentrated in the auto sector, is weighing on production at factories.

A separate report from the Fed on Wednesday showed tariffs continued to cause anxiety among businesses. In its Beige Book report of anecdotal information on business activity collected from contacts nationwide, the central bank described economic activity as expanding at a “modest” pace from April through mid-May. It said the outlook for the months ahead was “solidly positive but modest.”

Last month’s increase in hiring in the services sector suggested that a sharp slowdown in private payrolls growth in May shown in another report on Wednesday was probably a fluke.

The ADP National Employment Report showed private employers added only 27,000 jobs in May, the fewest since March 2010, after creating 271,000 positions in April.

The ADP figures came ahead of the Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public- and private-sector employment. The ADP report, which is jointly developed with Moody’s Analytics, has a poor record predicting the private payrolls component of the government’s employment report.

According to the ADP report, employment in the goods-producing sector fell by 43,000 jobs in May, the first drop in nearly 2-1/2 years. Manufacturing payrolls decreased 3,000 and construction shed 36,000 positions, the most since 2010.

The services sector added 71,000 jobs last month, concentrated in professional and education and health services.