Stocks edged higher Wednesday after key reports on private sector hiring and the services industry provided reassurances that the economy continues to grow.
Payroll company ADP said private employers modestly increased hiring last month, while the Institute for Supply Management’s service sector index rose unexpectedly in July. The Dow Jones industrial average gained 31 points in afternoon trading.READ MORE: Michigan Matters: Where are the Female CEOs in Michigan?
The reports show that while growth might be sluggish, there are no indications the economy is headed back into recession. 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 recovery.
The latest batch of earnings were largely better than expected. 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.
Despite the upbeat earnings and better-than-expected economic reports, many investors remain cautious. That kept the market from big gains Wednesday. Quincy Krosby, Prudential Financial’s market strategist, said the market needs much more than one positive report on private sector employment to gain confidence in the economic outlook.
“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.
In afternoon trading, the Dow Jones industrial average rose 31.30, or 0.3 percent, to 10,667.68. The Standard & Poor’s 500 index rose 4.16, or 0.4 percent, to 1,124.62, while the Nasdaq composite index rose 12.56, or 0.6 percent, to 2,296.08.
About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 514.9 million shares.
Volume remains light, which means the few people 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 and its monthly employment report.
The 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, which is broader and includes government as well as private sector employment, is due out Friday. 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.READ MORE: MSU Police: Tip From Private Investigator Led To Discovery Of Body Believed To Be Brendan Santo
ADP said private employers added 42,000 jobs last month, slightly better the forecasts of economists polled by Thomson Reuters.
People worried about their jobs have cut back on shopping and avoided big purchases like new homes, which has stifled growth across many sectors of the economy. Analysts have said the economy and the stock market could remain stagnant until there are clear signs of significant job growth.
The ISM’s service sector index rose to 54.3 in July from 53.8 in June. That’s better than the 53 forecast by economists and indicates expansion for the largest component of the country’s economy. Any reading above 50 indicates growth.
The ISM report was especially encouraging because the services sector accounts for the majority of employment in the country, so growth there could indicate new jobs being added. It also comes two days after ISM said the manufacturing sector continued to grow in July. That report sparked big gains in the market.
Paul Zemsky, head of asset allocation at ING Investment Management, said economic reports are starting to fall more inline with expectations after regularly falling short of forecasts throughout the second quarter.
“The negative data we saw late in the second quarter caused people to lower their expectations,” Zemsky said. The more modest expectations investors now have could give the market room to move higher, Zemsky said.
Investors sold Treasurys to move into stocks, sending interest rates in the bond market higher. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.95 percent from 2.92 percent late Tuesday. That yield helps set rates on mortgages and other consumer loans.
Priceline.com surged $51.00, or 22.1 percent, to $281.67. CBS rose 37 cents, or 2.5 percent, to $15.38. Electronic Arts jumped $1.11, or 6.9 percent, to $17.29, while Anadarko rose $2.19, or 4.1 percent, to $55.33. Whole Foods fell $3.26, or 8.3 percent, to $36.23.
Overseas, Japan’s Nikkei stock average fell 2.1 percent. A stronger yen hurt Japanese exporters, driving down stocks prices. The yen hit a nine-month low against the dollar.
Britain’s FTSE 100 fell 0.2 percent, Germany’s DAX index rose 0.4 percent, and France’s CAC-40 rose 0.4 percent.MORE NEWS: Consumer Alert: How To Avoid Fake N95, KN95 Masks
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