Wall Street closed sharply higher on Wednesday, helping the Nasdaq to its highest level since early May, as strong earnings forecasts from PayPal and CVS Health Corp boosted sentiment.

Data showed that the US services sector unexpectedly rebounded in July on strong orders growth, while supply bottlenecks and price pressures eased. This supports the view that the economy is not in recession despite a drop in output in the year’s first half.

A fresh batch of strong results from companies including PayPal (PYPL.O) and CVS Health Corp boosted sentiment in a largely upbeat quarterly reporting season. The better-than-expected report helped Wall Street bounce back from decades of worries about high inflation, rising interest rates and shrinking economic output.

Apple (AAPL.O) and Amazon (AMZN.O) rose nearly 4%, while Facebook owner Meta Platforms (META.O) rose 5.4%.
PayPal surged nearly 10% after raising its annual profit guidance and said activist investor Elliott Management owns a more than $2 billion stake in the fintech company.

CVS Health rose 6.3% after the largest US pharmacy chain raised its annual profit forecast after reporting strong quarterly results.

Another factor behind Wednesday’s gains in stocks was investors’ growing confidence that the Fed has delivered most of the rate hikes necessary to control inflation, Manuelian said.

Meanwhile, Richmond Fed President Thomas Barkin joined policymakers on Wednesday, saying the central bank is committed to controlling inflation and returning it to its 2% target.

The S&P 500 gained 1.56% to end at 4,155.12. The Nasdaq gained 2.59% to 12,668.16, while the Dow Jones Industrial Average gained 1.29% to 32,812.50.

Additional data on Wednesday showed new orders for US manufactured goods rose strongly in June, and business spending on equipment was stronger than initially expected, pointing to underlying strength in manufacturing despite rising interest rates.

The most-traded stock on the S&P 500 was Tesla, with $24.3 billion on the day. Its shares rose 2.27%.

Of the 11 sectors in the S&P 500, 10 advanced, led by information technology (.SPLRCT) up 2.69%, followed by consumer discretionary, up 2.52%. The S&P 500 has rebounded about 13% from its mid-June closing low and must climb another 15% to get back to its all-time high close in early January.

Moderna Inc (MRNA.O) surged about 16% after the vaccine maker announced a $3 billion share buyback program. Regeneron Pharmaceuticals rose 5.9% after quarterly revenue beat estimates, while coffee chain Starbucks (SBUX.O) rose more than 4% after reporting an upbeat quarterly profit. Advancing issues outnumbered decliners in the S&P 500 (.AD.SPX) by a ratio of 3.7 to 1. The S&P 500 posted two new highs and 30 new lows; the Nasdaq posted 51 new highs and 37 new lows. Volume on US exchanges was relatively high, with 11.7 billion shares traded, compared with the 10.7 billion average for the previous 20 sessions.