Stocks jump as services industries grow for 2nd straight month, private sector job losses slow

Investors rushed into stocks after stronger reports on service industries and employment eased two of the biggest worries about the U.S. economy.

The Dow Jones industrial average rose more than 120 points after the Institute for Supply Management said service industry activity grew for a second straight month in October. The trade group's service index slipped to 50.6 from 50.9 in September. A reading above 50 signals growth. Analysts polled by Thomson Reuters had expected a 51.5.

Although the index didn't meet forecasts, the ISM said new orders, which are an indicator of future business activity, grew faster. Business activity also picked up.

Encouraging news about the labor market also boosted investors' mood. The ADP National Employment Report said 203,000 private sector jobs were lost in October, down from the 227,000 lost in September. It was the seventh straight month of declining job losses.

That stirred hopes for a better-than-expected employment report from the Labor Department on Friday.

In midday trading, the Dow rose 122.35, or 1.3 percent, to 9,894.26. The broader Standard & Poor's 500 index rose 12.02, or 1.2 percent, to 1,057.43, and the Nasdaq composite index rose 17.42, or 0.9 percent, to 2,074.74.

The latest reports bolstered hopes that consumers could increase consumer spending, a critical factor for an economic recovery.

The advance also came as investors awaited an assessment of the economy from the Federal Reserve following the conclusion of a two-day meeting later Wednesday.

Policy makers aren't expected to raise the Fed's benchmark interest rate from essentially zero, hoping to sustain an economic turnaround by keeping borrowing rates low. But investors will be looking for the Fed's take on the 3.5 percent annual growth rate in the economy during the third quarter and whether such growth will continue. Investors also would like more guidance on how the Fed plans to withdraw its stimulus programs without threatening the recovery.

Investors have grown fearful that the economic rebound they've been betting on over the past eight months will be fleeting, considering that job losses remain high and consumers still aren't spending freely. Stocks have zigzagged over the past few weeks amid the heightened uncertainty.

Christopher Molumphy, chief investment officer for fixed income at Franklin Templeton Investments, said the reports are encouraging though he warned improvements in the economy are likely to be gradual.

"The individual items together are continuing to point to a generally improving fundamental backdrop," he said.

Among companies posting earnings, media conglomerate Time Warner Inc. reported a 38 percent drop in third-quarter profit, but the results beat expectations. The company also boosted its full-year earnings forecast. Its shares slipped 22 cents to $29.94.

Pulte Homes Inc.'s third-quarter loss widened, but the homebuilder said it has continued to see stabilization in the housing market. Shares rose 44 cents, or 4.7 percent, to $9.67.

In other trading, bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.51 percent from 3.47 percent late Tuesday.

The dollar fell against other major currencies, helping to send commodities prices higher. Gold surged to a new high of $1,096.20 an ounce. Crude oil added 67 cents to $80.27 a barrel on the New York Mercantile Exchange as the government said U.S. crude supplies fell more than expected.

The Russell 2000 index of smaller companies rose 2.32, or 0.4 percent, to 572.94.