Stocks jump as services sectors grow for 2nd month
NEW YORK (AP) – Investors rushed into stocks after stronger reports on service industries and employment eased two of the biggest worries about the U.S. economy.
The Dow Jones industrial average rose more than 125 points after the Institute for Supply Management said service industry activity grew for a second straight month in October. The trade group’s service index slipped to 50.6 from 50.9 in September. A reading above 50 signals growth. Analysts polled by Thomson Reuters had expected a 51.5.
Although the index didn’t meet forecasts, the ISM said new orders, which are an indicator of future business activity, grew faster. Business activity also picked up.
Encouraging news about the labor market also boosted investors’ mood. The ADP National Employment Report said 203,000 private sector jobs were lost in October, down from the 227,000 lost in September. It was the seventh straight month of declining job losses.
That stirred hopes for a better-than-expected employment report from the Labor Department on Friday.
In late morning trading, the Dow rose 127.11, or 1.3 percent, to 9,899.02. It had been up 60 ahead of the service index.
The broader Standard & Poor’s 500 index rose 15.00, or 1.4 percent, to 1,060.41, and the Nasdaq composite index rose 23.44, or 1.1 percent, to 2,080.76.
The two reports calmed some concerns that the economy won’t be able to recover until consumers feel more secure in their jobs to start spending at higher levels.
The advance also came as investors awaited an assessment of the economy from the Federal Reserve policymakers following the conclusion of a two-day meeting later Wednesday.
Policy makers aren’t expected to raise the Fed’s benchmark interest rate from essentially zero, hoping to sustain an economic turnaround by keeping borrowing rates low. But investors will be looking for the Fed’s take on the 3.5 percent annual growth rate in the economy during the third quarter and whether such growth will continue. The market would also like more guidance on how the Fed plans to withdraw its stimulus programs without threatening the recovery.
Investors have grown fearful that the economic rebound they’ve been betting on over the past eight months will be fleeting, considering that job losses remain high and consumers still aren’t spending freely. Stocks have zigzagged over the past few weeks amid the heightened uncertainty.
Christopher Molumphy, chief investment officer for fixed income at Franklin Templeton Investments, said the reports are encouraging though he warned improvements in the economy are likely to be gradual.
“The individual items together are continuing to point to a generally improving fundamental backdrop,” he said.
Stocks ended mostly higher Tuesday, after swinging between gains and losses, as an increase in commodity prices and corporate dealmaking abated some of investors concerns about the economy. The Dow Jones industrial average slipped 17 points, after rising 77 on Monday, while broader indexes rose modestly.
The latest earnings reports were mostly upbeat. Comcast Corp. reported a 22 percent increase in its third-quarter earnings. The nation’s largest cable TV operator also said it sees signs the economy is improving. Comcast shares rose 4 cents to $14.55.
Media conglomerate Time Warner Inc. reported a 38 percent drop in third-quarter profit, but the results beat expectations. The company also boosted its full-year earnings forecast. Its shares added 69 cents, or 2.3 percent, to $30.85.
Pulte Homes Inc.’s third-quarter loss widened, but the homebuilder said it has continued to see stabilization in the housing market. Shares rose 66 cents, or 7.2 percent, to $9.89.
In other trading, bond prices fell slightly. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.50 percent from 3.47 percent late Tuesday.
The dollar fell against other major currencies, helping to push commodities prices higher. Gold surged to a new high of $1,096.20 an ounce. Crude oil added $1.29 to $80.89 a barrel on the New York Mercantile Exchange as the government said U.S. crude supplies fell more than expected last week.
The Russell 2000 index of smaller companies rose 4.55, or 0.8 percent, to 575.17.