US STOCKS-Wall Street gains as weak services data raises rate-cut expectations

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* Sept. ISM services sector activity falls more than
expected
* Data boosts bets of interest rate cut in Oct.
* PepsiCo rises after quarterly beat
* Indexes: Dow +0.47%, S&P 500 +0.80%, Nasdaq +1.12%

(Updates to close)
By Noel Randewich
Oct 3 (Reuters) - Wall Street stocks climbed on Thursday
after data showing U.S. services-sector activity at a three-year
low fueled expectations that the Federal Reserve would cut
interest rates to stem a wider economic downturn.
Microsoft MSFT.O rose 1.2% and Facebook FB.O added 2.7%,
with the two contributing more than any other companies to the
S&P 500's gain.
The market dropped after the Institute for Supply Management
(ISM) said its non-manufacturing activity index fell to a
reading of 52.6 in September, the lowest since August 2016.
That added to fears sparked on Tuesday when a report showed
U.S. factory activity contracted to its lowest level in more
than a decade, as well as data on Wednesday showing private
payrolls growth in August was not as strong as previously
estimated.
Stock prices bounced back from the dour economic data as
bets on a third U.S. rate cut this year at Fed's October policy
meeting surged to 90% from 40%, according to CME Group's Fed
Watch tool.
"The degradation of the data, especially the
non-manufacturing data, kind of pushes the Fed to another cut,"
said Kim Forrest, chief investment officer at Bokeh Capital
Partners in Pittsburgh.
Traders are again expecting at least two more rate
reductions by the end of 2019, which they had abandoned after
the central bank described each of its last two rate cuts as a
"mid-cycle adjustment." MMT/
"We are at a critical point. Global growth is slowing and
U.S. growth is decelerating because of trade disputes and
uncertainty caused by trade policy," said Ben Phillips, chief
investment officer at EventShares. "But the market loves easy
money, and when it gets a whiff of it, it gets high."
A pivotal jobs report on Friday may contribute more evidence
of whether the U.S.-China trade war is pushing the world's
largest economy toward a recession.
The Dow Jones Industrial Average .DJI rose 0.47% to end at
26,201.04, while the S&P 500 .SPX gained 0.80% to 2,910.63.
The Nasdaq Composite .IXIC added 1.12% to end the session
at 7,872.27.
Over the past 12 months, the S&P 500 is down about 0.5%.
PepsiCo Inc PEP.O on Thursday rose 3% after beating
quarterly expectations as higher advertising and new low-calorie
versions of Gatorade boosted demand for its beverages in North
America. Its shares pushed the S&P consumer staples index .SPLRCS
0.7% higher. All of the 11 major sectors rose, led by a 1.3%
rise in the energy index .SPNY .
Corona maker Constellation Brands Inc STZ.N fell 6.1%
after it took an $839 million markdown in the value of its
investment in pot firm Canopy Growth WEED.TO during the
quarter. Advancing issues outnumbered declining ones on the NYSE by a
1.80-to-1 ratio; on Nasdaq, a 1.56-to-1 ratio favored advancers.
The S&P 500 posted 9 new 52-week highs and 20 new lows; the
Nasdaq Composite recorded 6 new highs and 109 new lows.
Volume on U.S. exchanges was 7.1 billion shares, compared
with the 7.3 billion average for the full session over the last
20 trading days.

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