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Stocks edge higher on jobs, service sector growth

Stocks edged higher Wednesday after key reports on private sector hiring and the services industry provided reassurances that the economy continues to grow.Payroll company ADP said private employers modestly increased hiring last month, while the Institute for Supply Management's...

Stocks edged higher Wednesday after key reports on private sector hiring and the services industry provided reassurances that the economy continues to grow.

Payroll company ADP said private employers modestly increased hiring last month, while the Institute for Supply Management's service sector index rose unexpectedly in July. The Dow Jones industrial average gained 11 points in late morning trading.

Still major indexes were off their highs for the day because of continued caution about the strength of the recovery. The Dow was up more than 65 points just after the ISM report was released.

The reports show that while growth might be sluggish, there are no indications the economy is headed back into recession. Traders have grappled with mixed earnings and economic reports in recent weeks that provide a mixed picture about the pace of recovery.

Quincy Krosby, Prudential Financial's market strategist, said the market needs more than one report on jobs to gain confidence and send shares sharply higher.

"ADP was positive, but when all is said and done, the market needs stronger confirmation to grind higher," Krosby said. Until then, stocks are likely to trade in a tight range, she said.

The confirmation investors want could come in the next two days when the Labor Department releases its weekly report on initial claims for jobless benefits and its monthly employment report.

The ADP report is often seen as an early indicator of what the more important monthly jobs report from the Labor Department will look like. That report, which is broader and includes government as well as private sector employment, is due out Friday. It's expected to show private employers added 90,000 jobs last month and the unemployment rate rose to 9.6 percent from 9.5 percent in June.

ADP said private employers added 42,000 jobs last month, slightly better the forecasts of economists polled by Thomson Reuters.

People worried about their jobs have cut back on shopping and avoided big purchases like new homes, which has stifled growth across many sectors of the economy. Analysts have said the economy and the stock market could remain stagnant until there are clear signs of significant job growth.

The ISM's service sector index rose to 54.3 in July from 53.8 in June. That's better than the 53 forecast by economists and indicates expansion for the largest component of the country's economy. Any reading above 50 indicates growth.

The ISM report was especially encouraging because the services sector accounts for the majority of employment in the country, so growth there could indicate new jobs being added. It also comes two days after ISM said the manufacturing sector continued to grow in July. That report sparked big gains in the market.

In late morning trading, the Dow Jones industrial average rose 10.64, or 0.1 percent, to 10,646.94. The Standard & Poor's 500 index rose 1.26, or 0.1 percent, to 1,121.72, while the Nasdaq composite index rose 5.81, or 0.3 percent, to 2,289.33.

About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 260.4 million shares.

Investors sold Treasurys to move into stocks, sending interest rates in the bond market higher. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.95 percent from 2.92 percent late Tuesday. That yield helps set rates on mortgages and other consumer loans.

Overseas, Japan's Nikkei stock average fell 2.1 percent. A stronger yen hurt Japanese exporters, driving down stocks prices. The yen hit a nine-month low against the dollar.

Britain's FTSE 100 fell 0.3 percent, Germany's DAX index rose 0.3 percent, and France's CAC-40 rose 0.3 percent.

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