Stocks Push Higher as Service Sector Grows

Stocks pushed higher Wednesday after a report showed the services sector has begun to grow again. Still, a pair of weak private employment readings and anticipation of the government's jobs report capped gains.

3M , Alcoa and American Express led the Dow in early trading, while Kraft , Travelers and JPMorgan were at the bottom of the pack.

Ford was at the front of the S&P pack, barreling past $11, after the auto maker posted better-than-expected sales a day earlier.

The ISM said its nonmanufacturing index, which gauges the service sector, rose to 50.1 in December from 48.7 in November. The reading was slightly below expectations but was still above the 50 mark, which indicates growth. The index has been above 50 for three of the past four months.

Meanwhile, ADP said December job losses dropped to 84,000, below the 90,000 estimate and well below the revised November decline of 145,000.

In a separate report, job outplacement firm Challenger, Gray & Christmas said planned layoffs were at 45,094 in December, the fewest since December 2007.

ADP undercounts the actual number by an average of 92,000 over the past six months, according to data from Nomura Securities, but Wall Street still watches the report for insight ahead of the government's jobs report, which is due out on Friday. Buzz in the market suggests there may have even been jobs added to payrolls last month — the first time that would've happened in two years. Speculation is that it could be as much as 30,000 or 40,000 jobs added.

Joel Naroff of Naroff Economic Advisors said the real takeaway from the ADP report was to temper expectations — that it's not the end of the world if the report doesn't show job growth.

"I don’t think that firms will start adding lots of people until they believe the recovery will be strong enough to support that long-term commitment," Naroff wrote in a note to clients. "Right now, business confidence, which is rising, is not close to a level where that kind of hiring is likely to take place. So let’s hope for some job growth appearing soon but remain cautious about the outlook for this year."

Demand for home mortgages remained at a six-month low, the Mortgage Bankers Association reported, as borrowing costs crept higher. The average on the 30-year fixed rose a tenth of a percentage point to 5.18 in the Jan. 1 week.

Still to come: the Fed will release the minutes from its last meeting at 2 pm.

Oil slipped below $82 a barrelafter a report showed crude inventories rose by 1.3 million barrels last week. Gold hit a 3-week high, topping $1,130 an ounce. The dollar was mixed, rising against the yen but flat against the euro as gains were capped by the soft employment readings.

Dow Chemical shares rose after Barclays Capital upgraded the stock to "overweight" from "equal-weight."

Kraft Food shares fell as the company continues in its battle to acquire Cadbury. Kraftsaid it had a 1.52 percent takeup from Cadbury shareholders for its $16.8 billion hostile bid.

Winterizing Your Portfolio - A CNBC Special Report
Winterizing Your Portfolio - A CNBC Special Report

The minutes of the mid-December Federal Open Market Committee meeting will be out at 2 pm. As usual, investors will be focused on more clues as to how the Federal Reserve might exit the extraordinary measures implemented to deal with the economic crisis, although there's been plenty of Fed commentary on that subject since that meeting took place.

Earnings season isn't quite here yet, but a few reports of note: Family Dollar beat earnings expectations, sending its shares up more than 12 percent.

Walgreen shares skidded after the drugstore said same-store sales fell in December — analysts had expected an increase.

Bed, Bath and Beyond is set to report after today's closing bell.

The retail sector could benefit from news out of MasterCard's SpendingPulse unit, which says that retailers had a strong finish to the 2009 holiday shopping season.

— Peter Schacknow contributed to this article.

Still to Come:

WEDNESDAY: EU regulators' decision on Cadbury/Kraft deal; weekly mortgage apps; Challenger, ADP jobs reports; ISM services index; weekly crude inventories; Fed minutes; Earnings from Family Dollar, Monsanto, Bed, Bath & Beyond
THURSDAY: CES; chain-store sales; Bank of England rate decision; jobless claims; Fed's Hoenig speaks; Earnings from Constellation, Lennar
FRIDAY: Jobs report; wholesale trade; Fed's Lacker speaks; consumer credit

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