Stocks extend gains as economy worries calm
EmptyNEW YORK -- Stocks showed broad gains Wednesday after a stronger-than-expected reading on the health of the service sector and figures on worker productivity calmed some fears about the frailty of the economy.
The Institute for Supply Management reported that activity in the service sector declined in February though the decrease wasn't as steep as Wall Street had feared. The ISM index of non-manufacturing activity came in at 49.3. Analysts had expected a reading of 46.5, according to Dow Jones Newswires.
The ISM report was particularly gratifying to Wall Street after a stunning drop in the January service sector index had sent stocks plunging when it was released a month ago.
The service sector findings offset some unease about a Labor Department report that showed labor costs rose at a 2.6% annual pace in the fourth quarter. Rising costs often draw concern from investors because the increases can make it harder for the inflation-weary Federal Reserve to justify cutting interest rates to boost the economy.
However, the report also found that productivity -- the amount than a worker produces for every hour on the job -- rose at an annual pace of 1.9%.
Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams, pinned the market's rally to a follow-through from a recovery Tuesday as well as the economic figures, such as the productivity number, that offered investors some reason for relief.
Still, he remains cautious. "I still think you should sell into the rallies," he said.
In late morning trading, the Dow Jones industrial average rose 82.47, or 0.68%, to 12,296.27.
Broader stock indicators also carved gains. The Standard & Poor's 500 index rose 10.32, or 0.78%, to 1,337.07, while the Nasdaq composite index rose 20.16, or 0.89%, to 2,280.44.
The move higher comes a day after uncertainty about the economy prompted erratic trading. Stocks recovered from a sell-off to finish mixed following reassuring comments from Cisco Systems Inc. about its business and amid rumors that plans to help bond insurer Ambac Financial Group Inc. are moving ahead.
Bond prices fell Wednesday as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.68% from 3.63% late Tuesday.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose $2.05 to $101.57 on the New York Mercantile Exchange.
In corporate news, Pfizer Inc. affirmed its 2008 sales and profit forecasts and said it plans to outsource more drug manufacturing and reduce its global real estate holdings to lower costs. The drug maker, one of the 30 stocks that make up the Dow industrials, is cutting costs ahead of generic competition for its blockbuster cholesterol drug, Lipitor. Pfizer slipped 5 cents to $22.20.
BJ's Wholesale Club Inc. jumped $2.82, or 8.5%, to $36.10 after saying it expects first-quarter same-store sales, or sales at stores open at least a year, will rise 4% to 6% excluding gas sales.
Saks Inc., parent of the high-end Saks Fifth Avenue department store chain, said its fiscal fourth-quarter profit rose 83% to $39.5 million from $21.5 million a year earlier. Saks rose 41 cents, or 2.7%, to $15.90.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 430.7 million shares.
The Russell 2000 index of smaller companies rose 4.86, or 0.71%, to 685.84.
Overseas, Japan's Nikkei stock average closed down 0.16%. In afternoon trading, Britain's FTSE 100 rose 1.29%, Germany's DAX index rose 1.93%, and France's CAC-40 advanced 1.54%.