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CNBC ON DIGG

Stocks Jump Despite Services-Report Miss

Published: Wednesday, 4 Nov 2009 | 12:03 PM ET

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By: Cindy Perman
CNBC.com

Stocks jumped Wednesday as investors shrugged off a weaker-than-expected reading on the services sector and cheered an improvement on the jobs front.

Stocks had opened higher after a pair of reports showed an improvement on the jobs front. Then, after a weaker-than-expected report on the services sector, which accounts for more than two-thirds of the economy, stocks initially pared gains, before bounding higher.

The Dow Jones Industrial Average was up more than 100 points, or over 1 percent. The S&P 500 and Nasdaq were up more than half a percent.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

All but one of the 30 Dow components were higher today: Alcoa [AA Loading... () ], Disney [DIS Loading... () ] and Merck [MRK Loading... () ] led the pack. Kraft [KFT Loading... () ] was the lone decliner.

Gold hit yet another record this morning — this time it topped $1,093 a troy ounce. Oil topped $80 a barrel and the dollar fell.

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Intel [INTC Loading... () ] was under the microscope after the Wall Street Journal reported that New York Attorney General Andrew Cuomo has filed antitrust charges, alleging that the chip giant threatened computer makers and paid them huge sums of money to get them to stop using rival chips.

The ISM reported its gauge of the services sector dropped to 50.6 in October from 50.9 in September. The fact that it came in above 50 means the sector remains in expansion mode but it fell short of the 51.5 reading economists surveyed by Reuters had expected.

Payroll-services firm ADP reported that fewer jobs were lost in October than in previous months and outsourcing-consulting firm Challenger, Gray & Christmas reported planned layoffs hit a 19-month low.

The reports are widely seen as a precursor to the government's October jobs report, due out on Friday. Economists expect to see 175,000 jobs were shed from nonfarm payrolls, fewer than in previous months.

Earlier, the Mortgage Bankers Association said applications for home loans increased after interest rates slipped below 5 percent.

Still to come: At 10:30am ET, we'll get the usual Wednesday reading on oil and gasoline inventories from the Energy Department's Energy Information Agency.

Among the notable commentary this morning: Banking analyst Meredith Whitney said "normalized" earnings for banks is a fallacy — with consumers struggling and dramatic regulatory change, earnings will be negatively impacted for a protracted period.

And Nouriel Roubini, the economist often referred to as "Dr. Doom," elaborated on his "mother of all carry trades" theory, saying if the Fed keeps interest rates low, therefore weakening the dollar, it will prolong the carry trade and make the unwind all the more painful.

The Fed will wrap up a two-day meeting today, issuing its statement at 2:15pm ET. Investors will be looking to see if policy makers remove their vow to keep rates low for an "extended period." Some say it could happen today — others say it's too soon.

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"Once they start removing that, that's a real sign that they intend, within six months, to start raising rates," Deutsche Bank economist Torsten Slok told Reuters. "But it's just premature, looking at the economic numbers, to arrive at that conclusion."

In the morning's earnings news, Kraft [KFT Loading... () ] and Comcast [CMCSA Loading... () ] beat estimates, and Time Warner [TWX Loading... () ] raised its outlook.

After the bell, we'll get reports from Dow component Cisco Systems, [CSCO Loading... () ] News Corp., [NWS Loading... () ] and Qualcomm.

Get the Latest Earnings News at CNBC's Earnings Central

Oracle [ORCL Loading... () ] and Sun Microsystems [JAVA Loading... () ] skidded as the Financial Times reports that the European Union is close to formally objecting to Oracle's $7.4 billion takeover of Sun on antitrust grounds — which could be a step on the way to blocking the deal.