U.S. Stocks Rally On Private-sector Jobs Report
NEW YORK (MarketWatch) -- U.S. stocks rose Wednesday, building on strong gains from the previous session, after a private-sector jobs report showed unexpected growth in employment during July.
"The [jobs] numbers did help," said Owen Fitzpatrick, head of U.S. equities at Deutsche Bank. "It's surprising, that there was actually job growth. But the ADP report hasn't been a great indicator in the past."
The market lost some steam as crude-oil prices rebounded from early weakness as weekly data showed a smaller-than-expected drop in inventories. Still, strong gains in the energy sector, where a large number of companies are posting earnings this week, provided support.
The Dow Jones Industrial Average gained 112 points to 11,508, with 24 of its 30 components advancing. Shares of oil giant Chevron Corp. and aluminum producer Alcoa Inc. paced gains among blue chips.
The S&P 500 index rose 10 points, or 0.9%, to 1,273.
In the broader market, the financial sector led the gains after the Securities and Exchange Commission extended rules to protect shares of key financial firms, including housing-finance giants Fannie Mae and Freddie Mac , believed to have been the subject of illegal short sales.
The ailing financial sector also rebounded Tuesday after Merrill Lynch announced it would offer $8.5 billion in stocks to cover investment losses. Financials and the broader market fell sharply on Monday after news of more bank failures over the weekend.
"The Merrill news has boosted hope that we've had the capitulation, the event allowing us to rebound from here," Deutsche Bank's Fitzpatrick said.
The Nasdaq Composite gained 10 points to 2,329.
Trading volumes showed 554 million shares exchanging hands on the New York Stock Exchange and 353 million trading on the Nasdaq stock exchange. Advancing issues outpaced decliners by a ratio of 2 to 1 on the NYSE and of 3 to 2 on the Nasdaq.
Slight rise in jobs
The ADP estimate of July employment indicated a 9,000 improvement in private-sector jobs. Economists surveyed by MarketWatch had been looking for a 50,000 decline, in line with the jobs weakness gripping the U.S. economy throughout 2008.
The employment figure, which excludes government jobs, comes two days before the official Labor Department report, which economists expect will show a reduction of 70,000 jobs for the month.
But the ADP report's reliability as an indicator was in dispute in some quarters. The report's "losing credibility by the month as a predictor of nonfarm payrolls," said Robert Kavcic, an economist at BMO Capital Markets.
The data still helped boost the dollar, which in turn put some pressure on commodities. A firmer U.S. currency makes dollar-denominated commodities, such as crude oil and gold, more expensive for holders of other currencies.
But oil gained some ground after the Energy Department reported that crude inventories fell by 100,000 to 295.2 million barrels in the week ended July 25, much less than the 1.3 million expected. A barrel of crude oil recently traded up 7 cents at $122.26.
Meanwhile, investors digested another series of earnings reports. A day after surprisingly strong results from U.S. Steel Corp. , leading global steelmaker ArcelorMittal said second-quarter profit more than doubled and issued an upbeat outlook for the third quarter.
Elsewhere, shares of Garmin Ltd. fell sharply after the navigation device maker cut its 2008 outlook.
Corning also fell, retreating after giving a cautious outlook on third-quarter sales.
Elan tumbled and Wyeth dropped sharply, as the drugmakers said a Phase II study of an Alzheimer's disease drug didn't generate statistically significant results.
After the close, Walt Disney Co. and Starbucks will report their quarterly financial results.
By Nick Godt