While you were sleeping: US economic data underpin stock rally

Trader Michael Milano works on the floor of the New York Stock Exchange. Photo / AP

Wall Street gained, sending the three benchmark indices to record highs, as better-than-expected US data on trade and factory orders bolstered sentiment.

A Commerce Department report showed factory goods orders rose a better-than-expected 1.2 percent in August, while a separate Commerce Department report showed the US trade deficit shrank to the lowest level in nearly a year.

Meanwhile, a Labour Department report showed initial claims for unemployment benefits fell 12,000 to a seasonally adjusted 260,000 for the week ended September 30.

Another Labour Department report, due Friday, is expected to show nonfarm payrolls increased by 90,000 jobs in September, following a gain of 156,000 in August, according to a Reuters survey of economists.

"We are continuing to get good economic news globally, specifically out of the US," Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh, told Reuters. "It looks like the US economy continues to expand and that is what is driving today."

Meanwhile, Federal Reserve Bank of San Francisco President John Williams underpinned bets for higher interest rates.

"These favourable employment numbers, combined with the findings on inflation and the steady pace of growth, are all behind my confidence that rates will need to rise to their new normal levels," Williams said in prepared remarks for a speech in St Louis, Missouri.

Separately, Philadelphia Fed President Patrick Harker told CNBC he's "pencilled in" an interest rate increase in December as well as three hikes next year.

In 2.12pm trading in New York, the Dow gained 0.4 per cent, while the Nasdaq Composite Index climbed 0.6 per cent. In 1.57pm trading, the Standard & Poor's 500 Index rose 0.5 per cent.

The Dow moved higher, led by gains in shares of Goldman Sachs as well as those of Microsoft and JPMorgan Chase, recently up 2.4 per cent, 1.7 per cent, and 1.5 per cent respectively.

The Dow rallied to a record 22,769.57, while the S&P 500 vaulted to a record 2,551.74, and the Nasdaq touched a record 6,577.51.

US Treasuries declined, sending yields on the 10-year note two basis points higher to 2.35 per cent.

"The data we've had has been pretty good and again hawkish-better than the inflation data we got with the PCE data last week," Michael O'Rourke, chief market strategist at JonesTrading Institutional Services, told Bloomberg.

"There's more re-pricing necessary in bonds, especially considering we're seeing pretty good economic data that's definitely going to keep the Fed on course."

Shares of Constellation Brands climbed to a record after the US beer, wine and spirits company whose brands include Corona posted quarterly earnings that exceeded expectations and upgraded its full-year outlook because of strong results in its beer business.

The company lifted its full-year comparable earnings forecast to a range of US$8.25 to US$8.40 per share, up from previous guidance for US$7.90 to US$8.10 per share, it said in a statement.

"During the quarter, we gained market share, improved margins, continued to generate strong free cash flow and executed exceptionally well," Chief Financial Officer David Klein said in a statement. "These results are driving the upward revision to our EPS estimate for the year."

Shares of Constellation Brands rallied, up 3.4 per cent at US$208.05 as of 1.08pm in New York. The stock touched a record high US$213.40 earlier in the day.

In Europe, the Stoxx 600 Index ended the session with a 0.2 per cent gain from the previous close. France's CAC 40 Index rose 0.3 per cent, while the UK's FTSE 100 Index advanced 0.5 per cent.

Germany's DAX Index inched 0.02 per cent lower.