Stocks rise on jobs, service growth
NEW YORK - Reassuring signs on employment and growth in the service industry got the stock market back on an upward trajectory Wednesday.
Major indexes rose after payroll company ADP said private employers increased hiring last month and a service sector index rose unexpectedly in July. The Dow Jones industrial average gained 44 points.
Investors were relieved that the two reports provided no signs that the economy might be headed back into recession, even though growth might be sluggish. Traders have grappled with earnings and economic reports at odds with each other in recent weeks that provide a mixed picture about the pace of the recovery.
The latest batch of earnings were largely better than expected, continuing a trend that has been seen over the past four weeks. Broadcaster CBS Corp., video game maker Electronic Arts Inc., online travel site Priceline.com Inc. and Anadarko Petroleum Corp. all climbed. Whole Foods Market Inc. was one of the few to report disappointing results.
The market has been mainly climbing over the past month on encouraging earnings and corporate profit forecasts. The Dow has gained 10.3 percent since closing at its lowest level of the year on July 2.
Despite the upbeat earnings and better-than-expected economic reports, many investors remain tentative ahead of the Labor Department's monthly employment report due on Friday. Quincy Krosby, Prudential Financial's market strategist, said the market needs much more than one positive report on private sector employment to gain confidence that the pace of recovery will speed up.
"ADP was positive, but when all is said and done, the market needs stronger confirmation to grind higher," Krosby said. Until then, stocks are likely to trade in a tight range, she said.
The Dow Jones industrial average rose 44.05, or 0.4 percent, to 10,680.43. The Standard & Poor's 500 index rose 6.78, or 0.6 percent, to 1,127.24, while the Nasdaq composite index rose 20.05, or 0.9 percent, to 2,303.57.
The Dow's rise Wednesday more than erased a 38-point loss from a day earlier when reports on personal income and spending and factory orders fell short of expectations.
Nearly three stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 975.5 million shares.
Trading volume has been unusually low in recent days, indicating that the few people actively participating in the market are mainly professional traders, said Bob Phillips, managing partner at Spectrum Management Group. Those types of investors typically trade quickly on the latest piece of news to be released, Phillips said. That adds to market volatility.
The confirmation investors are looking for in the jobs market could come in the next two days when the Labor Department releases its weekly report on initial claims for jobless benefits Thursday and its monthly employment report Friday.
Wednesday's ADP report is often seen as an early indicator of what the more important monthly jobs report from the Labor Department will look like. That report is broader and includes government as well as private sector employment. It's expected to show private employers added 90,000 jobs last month and the unemployment rate rose to 9.6 percent from 9.5 percent in June.
ADP said private employers added 42,000 jobs last month, slightly better the forecasts of economists polled by Thomson Reuters.
The ISM's service sector index rose to 54.3 in July from 53.8 in June. That's better than forecasts and indicates expansion for the largest component of the country's economy.