US benchmark equity indexes closed higher Wednesday as traders analyzed the latest economic data and corporate earnings.

The Dow Jones Industrial Average rose 0.7% to 44,873.3, while the S&P 500 advanced 0.4% to 6,061.5. The Nasdaq Composite increased 0.2% to 19,692.3. Real estate and technology led the gainers among sectors, while communication services saw the biggest drop. Materials was little changed.

In economic news, employment growth in the US private sector topped expectations for January, while pay gains stabilized, Automatic Data Processing (ADP) reported.

Growth in the US services sector slowed in January amid weakness in business activity and new orders, two surveys by the Institute for Supply Management and S&P Global (SPGI) showed Wednesday. The ISM survey indicated concerns regarding potential tariff actions by the Trump administration.

"We expect that the service sector will grow along a solid trend going forward," Jefferies said in a note to clients. "Our base case expectation is that the net effect of the tariffs will be rather modest on corporate profit margins and inflation, and that the drag will be overwhelmed by the positive impacts of deregulation and tax cuts."

The US trade deficit grew 25% in December, taking the 2024 shortfall to $918.42 billion, government data showed Wednesday.

Inflation in the US is approaching the Federal Reserve's 2% target, Chicago Fed President Austan Goolsbee said. However, "if we see inflation rising or progress stalling in 2025, the Fed will be in the difficult position of trying to figure out if the inflation is coming from overheating or if it's coming from tariffs," he said. "That distinction will be critical for deciding when or even if the Fed should act."

On Tuesday, China announced a series of retaliatory tariffs against the US. The Trump administration recently announced 25% tariffs on goods from both Canada and Mexico, along with a 10% levy on imports from China. However, President Donald Trump on Monday paused the announced tariffs on Mexico and Canada for a month.

The US 10-year yield fell 8.3 basis points to 4.43% Wednesday, while the two-year rate dropped 2.3 basis points to 4.19%.

In company news, Johnson Controls International (JCI) shares jumped 11%, the top gainer on the S&P 500, after the building systems manufacturer increased its fiscal 2025 earnings outlook and announced a new chief executive.

Amgen (AMGN) was the best performer on the Dow, up 6.5%. The company delivered a fourth-quarter beat late Tuesday.

Alphabet's (GOOG, GOOGL) class A shares fell 7.3%, while its class C shares dropped 6.9%, the steepest decliners on the Nasdaq and among the worst on the S&P 500. The Google parent's fourth-quarter revenue trailed Wall Street's estimates late Tuesday.

Advanced Micro Devices (AMD) was among the worst Nasdaq performers Wednesday, down 6.3%. Late Tuesday, the chipmaker forecast a sequential decline in revenue for the first quarter and reported weaker-than-expected data center sales for the fourth quarter.

West Texas Intermediate crude oil declined 2.1% to $71.19 a barrel Wednesday.

Commercial crude stockpiles in the US climbed by 8.7 million barrels to 423.8 million barrels through the week ended Friday, the Energy Information Administration said. The consensus was for a gain of 1.9 million barrels, according to a Bloomberg poll.

Gold rose 0.2% to $2,881.60 per troy ounce, while silver fell 1% to $32.70 per ounce.