Wall Street closed higher on Tuesday, driven by utilities and healthcare stocks. Investor confidence about impending rate cuts by the Fed was heightened by a downward payrolls revision by the Bureau of Labor Statistics. All three benchmark indexes closed in the green and reached record highs.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.4%, or 196.39 points, to close at 45,711.34. Fifteen components of the 30-stock index ended in negative territory, while 15 ended in positive territory.
The tech-heavy Nasdaq Composite added 80.79 points, or 0.4%, to close at 21,879.49.
The S&P 500 gained 17.46 points, or 0.3%, to close at 6,512.61. Seven of the 11 broad sectors of the benchmark index closed in the green. Utilities Select Sector SPDR (XLU), Communication Services Select Sector SPDR (XLC) and Health Care Select Sector SPDR (XLV) advanced 0.7%, 0.6% and 0.5%, respectively, while the Materials Select Sector SPDR (XLB) declined 1.6%.
The fear gauge CBOE Volatility Index (VIX) decreased 0.5% to 15.04. A total of 15.6 billion shares were traded on Tuesday, lower than the last 20-session average of 16.1 billion.
Weaker Labor Market Data Strengthens Case for Fed Cuts
Wall Street traded higher on Tuesday after the Bureau of Labor Statistics (“BLS”) released its payrolls revision report, which added weight to expectations that the Fed may soon cut interest rates. The report showed a deeper-than-expected downward revision to U.S. job growth over the past year, highlighting a labor market that is weaker than previously assumed. Investors interpreted the data as confirmation that the economy is cooling more quickly, reducing inflationary pressures and giving the Fed greater leeway to ease policy.
The BLS revealed a historic annual benchmark revision, trimming about 911,000 jobs from the previously reported payroll figures spanning April 2024 to March 2025. This adjustment, nearly halving the initially estimated job gains, marked the largest downward correction in BLS history and underscored a notably weaker labor market than previously understood.
Equities responded positively, as traders increased bets that the first rate cut could arrive as soon as the Fed’s September meeting. Market-based probabilities for multiple rate cuts by year-end also rose, with stronger conviction that the Fed is approaching the end of its tightening cycle. CME’s FedWatch tool currently assigns a 91.7% probability of a 25 bps rate cut in September, a 68.9% probability of another 25 bps cut in October and a 59.5% probability of a further 25 bps cut in December.
At the same time, there’s a bit of caution, as investors weighed the risk that the revisions point to underlying economic weakness that could limit corporate earnings growth. Still, the immediate reaction was dominated by optimism that monetary policy would shift toward accommodation sooner rather than later. The payrolls revision, combined with other softening labor market indicators, reinforced the view that the Fed’s battle against inflation has made significant progress, setting the stage for Wall Street to continue rallying on the prospect of rate relief.
Consequently, shares of Vistra Corp. VST and AT&T Inc. T jumped 3.1% and 1.8%, respectively. Both currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
UnitedHealth Stock Jumps on Medicare Advantage Update
UnitedHealth Group Incorporated’s UNH shares jumped 8.6% after the company reported that about 78% of its Medicare Advantage members are projected to be in plans rated four stars or higher for the 2026 payment year. These top-rated plans qualify for lucrative government bonus payments, boosting investor confidence in the strength of UnitedHealth’s Medicare Advantage business.
The rally was further supported by the company’s decision to reaffirm its full-year 2025 earnings outlook, offering reassurance to investors at a time when the healthcare sector faces heightened scrutiny. As a result, the stock became the top performer on both the Dow Jones Industrial Average and the S&P 500 for the day, and carried the healthcare sector with it.
No economic data was released on Tuesday.
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AT&T Inc. (T): Free Stock Analysis Report UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report Vistra Corp. (VST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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