Wall Street spikes higher after ISM data

Tuesday August 5, 11:29 am ET By Joe Bel Bruno, AP Business Writer
Wall Street moves higher ahead on strong ISM data, ahead of Fed meeting
NEW YORK (AP) -- Wall Street shot higher Tuesday as investors got some heartening economic news: a report that activity in the services sector fell less than expected last month, and another drop in the price of oil. The upbeat developments, which lifted the Dow Jones industrials nearly 200 points, came as the market awaited the outcome of a Federal Reserve meeting on interest rates.
The Institute for Supply Management, the trade group of corporate purchasing executives, said its services sector index rose to 49.5 from 48.2 in June. Analysts surveyed by Thomson Financial/IFR predicted it would rise to 49.0.
Any reading below 50 signals contraction. The report is based on a survey of the institute's members and covers such indicators as new orders, employment, inventories, prices and exports and imports.
The notion that the sector might be in better shape than many investors feared gave Wall Street reason for optimism. Moreover, the trade group's gauge for prices paid by non-manufacturers fell to 80.8 from June's 84.5, which was the highest on record. That indicated an easing of inflation, which has been a growing concern on the Street.
Oil prices slid further Tuesday, dropping to as low as $118 a barrel on widening expectations that the slumping U.S. economy will keep eroding consumer demand for gasoline and other petroleum products. Crude's retreat has eased some of Wall Street's concerns about the impact of higher prices on consumer spending, which accounts for more than two-thirds of the nation's economy.
Investors will get a better idea about how the Fed is feeling about the economy when it releases its policy statement at 2:15 p.m. EDT. The central bank, seeking to support an anemic U.S. economy and also contain inflation, is expected to keep its benchmark federal funds rate steady at 2 percent. As always, investors will be keen to see in the Fed's statement what its bias is toward future rate moves.
"Oil and the ISM service manufacturing index are sparking a nice rally, and then there's anticipation of the Fed meeting this afternoon," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners. "There's also light volume, and that might be the reason we're seeing the averages take a bigger leap."
In late morning trading, the Dow rose 190.27 or 1.69 percent, to 11,474.42. Earlier, the Dow was up just over 200.
Broader indexes also rose. The Standard & Poor's 500 index added 19.18, or 1.54 percent, to 1,268.19, and the Nasdaq composite index rose 33.84, or 1.48 percent, to 2,319.40.
Bonds were lower ahead of the Fed meeting. The yield on the benchmark 10-year Treasury note, which moves opposite its prices, rose to 3.98 percent from 3.97 percent late Monday.
The dollar traded mostly higher against other major currencies, while gold prices fell.
Light, sweet crude fell $1.93 to $119.48 on the New York Mercantile Exchange. Crude has closed lower in six of the last nine sessions and is 18 percent off its all-time high above $147 reached July 11.
In corporate news, Procter & Gamble Co., maker of Tide detergent and Gillette razors, said its fiscal fourth-quarter profit jumped 33 percent, boosted by price increases, overseas sales and tax benefits. Shares rose $1.98, or 2.9 percent, to $67.78.
Archer Daniels Midland Co. reported a 61 percent plunge in fourth-quarter profit, but said revenues soared amid higher prices for commodities like wheat and corn. The stock fell $1.44, or 5.2 percent, at $25.96.
D.R. Horton Inc., the nation's largest homebuilder, posted a narrower fiscal third-quarter loss as charges to write down the value of property declined. Shares fell 53 cents, or 4.7 percent, to $10.70.
Advancing issues led decliners by a 3 to 1 basis on the New York Stock Exchange, where volume came to 343.3 million shares.
The Russell 2000 index of smaller companies rose 9.43, or 1.34 percent, at 713.57.
Overseas, Japan's Nikkei stock average fell 18.52, or 0.14 percent, to 12,914.66. Britain's FTSE 100 rose 1.98 percent, Germany's DAX index rose 2.51 percent, and France's CAC-40 rose 1.97 percent.
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