Closing Market Report
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Stocks turn around after 2 days of losses
By Joe Bel Bruno
Associated Press
NEW YORK » Wall Street resumed its rally yesterday after new data showed the overall economy is holding up but isn't too strong to prevent the Federal Reserve from cutting interest rates.
Stocks turned around following two sessions of losses after a report showed hiring in the U.S. private sector expanded at a faster pace in November. ADP Employer Services said 189,000 jobs were added during the month - an increase that bodes well for consumer spending.
The report raised hopes for a strong November jobs report from the U.S. Labor Department on Friday.
Investors were also encouraged yesterday after the department reported worker productivity advanced by an annual rate of 6.3 percent in the summer, the fastest pace in four years, while wage pressures eased.
"The best news for the market is good news on the economy," said Jack Ablin, chief investment officer at Harris Private Bank. "There might be a general malaise among homeowners these days, but as long as more people are getting paychecks then the economy can withstand the stress."
Still, there is enough uncertainty in the economy to bolster the argument for lower rates. The financial sector is still struggling from months of credit problems, and the Institute for Supply Management reported yesterday that service sector growth slowed in November.
Yesterday's advance was fed by investors betting that the Fed might be generous and cut rates a half percentage point, or, in market lingo, 50 basis points.
The Dow rose 196.23, or 1.48 percent, to 13,444.96, resuming the big recovery it launched last week following a mostly dismal November.
The blue chip index got an extra boost from component American International Group Inc., which said that although it's expecting a hefty portfolio writedown in the fourth quarter, the ongoing mortgage crisis is manageable. AIG rose $2.70, or 4.9 percent, to $58.15.
Broader indexes also moved higher. The Standard & Poor's 500 index added 22.22, or 1.52 percent, to 1,485.01, while the Nasdaq composite index rose 46.53, or 1.78 percent, to 2,666.36.
The Russell 2000 index of smaller companies rose 13.58, or 1.81 percent, to 765.64.
Advancing issues led decliners by a nearly 3 to 1 basis on the New York Stock Exchange, where volume came to 1.43 billion shares.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.91 percent from 3.90 percent late Tuesday.
The dollar rose, and gold prices fell.
A resumption of the downtrend in oil prices also contributed to the gains on Wall Street. OPEC decided yesterday to keep production steady but set a new meeting for Feb. 1 to raise output if prices rise. Meanwhile, the government reported that U.S. oil supplies fell steeply last week while gasoline stockpiles rose, both by greater margins than analysts had expected.
Light, sweet crude fell 83 cents to settle at $87.49 a barrel on the New York Mercantile Exchange.