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Stocks move modestly higher in early trading

October 06, 2009|Associated Press

NEW YORK — Stock prices jumped Monday as a service industry index indicated the first growth in the sector in more than a year.

Financial stocks surged on upbeat analyst comments about big banks. Energy shares gained along with the price of oil.

The Dow Jones industrial average rose 112 points as all major stock indicators gained 1%. The Dow and the Standard & Poor's 500 index fell on eight of the 10 preceding trading days.

The Institute for Supply Management said its service index rose to 50.9 in September from 48.4 in August. Any reading above 50 suggests growth in the sector; below 50 indicates contraction. Analysts had expected a reading of 50.

The index was last above 50 in August 2008. It bottomed in November at 37.4.

The improvement in the service index is encouraging because it could help boost business and consumer confidence in the economy, a key element of a sustainable recovery, said Thomas J. Lee, chief U.S. equity strategist at J.P. Morgan.

"We really have to see the animal spirits kick in in the next six months," he said.

The Dow rose 112.08 points, or 1.2%, to 9,599.75, its first gain in four sessions. The broader Standard & Poor's 500 index rose 15.25 points, or 1.5%, to 1,040.46, and the Nasdaq composite index rose 20.04 points, or 1%, to 2,068.15.

The Russell 2,000 index of smaller companies climbed 1.9%.

Five stocks rose for every one that fell on the New York Stock Exchange. Volume was light.

Monday's advance followed the market's first back-to-back weekly drops since July, which came as reports on manufacturing and consumer sentiment fell short of expectations.

Stocks of large banks surged after Goldman Sachs upgraded them. Wells Fargo rose 6.9%, while Bank of America gained 3.8%. Financial stocks in the S&P 500 rose 3.3% on average.

Oil futures rose 46 cents to settle at $70.41 a barrel on the New York Mercantile Exchange as the dollar weakened. Shares of energy stocks in the S&P 500 rose 2.2%, while shares of material producers gained 2%.

Yields on government bonds rose along with stocks. The benchmark 10-year Treasury note rose to 3.22% from 3.21% late Friday.

The dollar fell against most other currencies, while gold prices rose.

In overseas trading, key stock indexes rose 0.7% in Britain, 0.8% in Germany and 0.7% in France. Japan's Nikkei stock average fell 0.6%.

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