By Donna Kardos
U.S. stocks posted solid gains Wednesday morning after the
Institute for Supply Management's latest report pointed to growth
in new orders and prices.
Additionally, jobs data from earlier in the morning boosted
hopes for the government's monthly jobs report due out Friday.
Stocks were also taking their cues off the dollar, which has
been weakening against the euro since the opening bell.At last
check, the Dow Jones Industrial Average (DJI) was recently up 140
points, or 1.4%, to 9912.
The Standard & Poor's 500 index (SPX) climbed 1.3%, with its
health-care sector in the lead, up 2.3%
The technology-heavy Nasdaq Composite Index (RIXF) rose 1%.
Merck (MRK) led the Dow gainers, surging 5.5% after it predicted
annual earnings growth in the high-single digits on a percentage
basis until 2013.
Walt Disney (DIS) was up 4% after it got the go-ahead from
China's central government to pursue plans to build a theme park in
Shanghai.
Kraft Foods (KFT) was the only component in the red, down 3.1%
after reporting weaker-than-expected third-quarter sales and
lowering its outlook for sales growth this year. The materials and
industrials sectors were also sharply higher.
Crude oil and gold futures were both rising to new highs, helped
by another decline in the dollar.
Gold for December delivery, the most actively traded contract,
hit an intraday high of $1,096.2 an ounce in electronic trading on
Globex, a record for the contract. It surpassed Tuesday's peak of
$1,088.50 an ounce.
Crude for December delivery gained $1.03, or 1.3%, to $80.63 a
barrel on the New York Mercantile Exchange. The contract earlier
touched an intraday high at $81.10 a barrel..
Treasurys fell, with the 2-year note dropping 2/32 to yield
0.94%, and the 10-year note sliding 8/32 to yield 3.499.
Wednesday's early gains contrast with the usual caution seen
ahead of the Federal Reserve's interest-rate decisions.
But stocks have already been in a slump lately, and Friday's
jobs report has become the bigger focus, since the Fed's upcoming
statement is expected to include no change in rates and perhaps
just a hint as to when they could change.
The jobs front got a bit of brighter news. Payroll giant
Automatic Data Processing and consultancy Macroeconomic Advisors
reported a 203,000 drop in private-sector jobs last month, on par
with the drop expected by economists and smaller than September's
decline.
In addition, outplacement firm Challenger, Gray & Christmas
said the number of layoffs announced by U.S. companies in October
fell to the lowest reading since March 2008.The Institute for
Supply Management reported its nonmanufacturing index moved to 50.6
in October, from 50.9 in September.
The index, which comprises mainly the service sector activities
that make up the strong majority of total American economic output,
was expected to hit 52.0 in October. But traders were encouraged
that the measure is still over 50, a level that indicates growth
and describes the breadth of the expansion. In addition, its new
orders and prices indexes both showed growth from September.
"That's encouraging," said Bruce Bittles, chief investment
strategist at Robert W. Baird. "It fits with the general scheme of
recent reports showing the economy is slowly healing. Nobody
expects the economy to boom but as long as it continues to put one
foot in front of the other, it's a positive signal for stocks."
As for the Fed's statement due at 2:15 p.m. Eastern time,
investors will be paying particular attention to the central bank's
description of the interest-rate outlook.
In its September policy statement, the central bank's Federal
Open Market Committee said that rates would likely remain low "for
an extended period," and any deviation from that language in
Wednesday's release could be interpreted as a sign higher rates are
on the way.Still, economist Bob Eisenbeis, a former senior vice
president of the Atlanta Fed, said he doesn't think the central
bank will change that part of its statement for now. "They're just
not going to risk choking off a recovery at this juncture," since
investors would quickly take more defensive positions in bonds and
stocks at the first hint of Fed tightening, Eisenbeis said.
Among stocks in focus Wednesday, Con-Way fell 10% after the
freight-transportation reported third-quarter profit and revenue
below analysts' estimates. R.R. Donnelley & Sons (RRD) climbed
4.4%, as the Chicago printing-services company's profit excluding
items beat analysts' expectations.