U.S. stocks posted gains on Wednesday as weak labor market data fueled hopes that the Federal Reserve will cut interest rates to support growth this year. 

Private payrolls disappointed in May 

Private payrolls grew at a slower-than-expected pace in May, with firms adding 152,000 workers, down from a downwardly revised 188,000 last month, according to data from payroll processor ADP.

According to economists’ forecasts, the estimate was 173,000. This announcement comes a day after another report showed an increase in payrolls.

These statistics suggest a possible slowdown in demand for labor in the world’s largest economy, which could bolster expectations that the Federal Reserve will opt to cut interest rates later this year.

The monthly nonfarm payrolls report will be released on Friday. 

This report follows Monday’s weak Purchasing Managers’ Index and the previous week’s downward revision to gross domestic product.

According to CME’s FedWatch tool, the probability of a 25 basis point Fed rate cut in September is 65%. Last week, the probability was less than 50%.

Expectations of an eventual rate cut strengthened Wall Street, but prospects of a cooling U.S. economy dampened gains. 

Dollar Tree pulls back after spin-off report

On the corporate front, Dollar Tree (DLTR) shares retreated 1.5% following a report that the discount retailer is exploring options for a possible sale or spin-off of Family Dollar.

Software consulting firm Hewlett Packard Enterprise (HPE) rebounded 14% after reporting strong quarterly results and a positive outlook backed by demand for artificial intelligence. 

Cybersecurity firm CrowdStrike (CRWD) surged more than 8% as it raised its full-year guidance following better-than-estimated quarterly results. 

Crude Oil Recovers After Recent Losses

Crude oil prices stabilized on Wednesday after recent losses as U.S. industry data pointed to a large inventory build in the United States.

Earlier in the week, oil stocks hit four-month lows as the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, raised the possibility of voluntary cuts by eight of its members to be phased out starting in October.

Additionally, the American Petroleum Institute announced that U.S. crude inventories rose by 4 million barrels in the week ending May 31. 

Gasoline and distillate inventories also rose, raising concerns about demand in the world’s largest fuel consumer, despite the start of the travel-filled summer season.

Official inventory data from the Energy Information Administration will be released later in the session.