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Stocks edge higher on hopes for additional support to European banks
NEW YORK (AP) ' Stocks rose for a second straight day Wednesday on signs that the U.S. economy grew in September and that European officials are moving to support the region's struggling banks.
The Dow Jones industrial average was up 92 points, or 0.9 percent, to 10,901 with half an hour of trading left. The Standard & Poor's 500 gained 16, or 1.4 percent, to 1,140. The Nasdaq composite jumped 48, or 2 percent, to 2,453.
Analysts said the gains were triggered by a report Tuesday in the Financial Times that European officials are exploring a joint effort to support the region's banks. That could limit damage to them should the Greek government default on its debt, which many traders expect. A default could cause losses for the region's banks by causing the value of the Greek bonds they hold to drop sharply.
The reports, which came out after European markets closed Tuesday, triggered a late rally in U.S. stocks that prevented the S&P 500 from entering a bear market ' a 20 percent decline from its April peak.
"The market is trading on sentiment right now, not fundamentals," said Rob Stein, head of Astor Asset Management. "People are hoping that the bounce yesterday means that we've hit a bottom, but the problems that were in the economy Monday haven't changed since then."
Other traders pointed to upcoming meetings by the European Central Bank and the Bank of England in which officials are expected to discuss additional measures to increase investors' confidence in the European banking system. "There's a reluctance to (bet that stocks are going to fall) when there's a chance that you'll see an announcement out of Europe to help the banks by the weekend," said Nick Kalivas, vice president of research at MF Global.
European bank stocks soared. Credit Agricole jumped 10 percent, and BNP Paribas gained 9 percent.
Reports that the U.S. economy continued to grow in September also sent stock indexes higher. The Institute of Supply Management said its gauge of the U.S. service sector, which employs 90 percent of the work force, grew in line with Wall Street's expectations. The index measures the strength of health care providers, banks, real estate, and other businesses outside of manufacturing.
Payroll processor ADP said private companies added 91,000 jobs last month. That was a slight gain from August. ADP's figures do not always predict what the government's broad employment report, which will be released Friday, but they can often influence traders' expectations. Wall Street economists expect that the unemployment rate will remain unchanged at 9.1 percent.
The latest indications that the U.S. economy continued to grow pushed Treasury prices lower as investors moved money out of lower-risk investments. The yield on the 10-year Treasury rose to 1.90 percent from 1.82 percent late Tuesday. It hit a record low of 1.71 percent Sept. 22.
Energy and materials companies, whose profits depend on an expanding economy more than other industries, led the stock market higher.
Cisco Systems Inc. led the 30 stocks that make up the Dow with a 4.4 percent gain. Bank of America lagged, dipping 3 percent. The bank has lost 8 percent over the last week.
European stock markets rose broadly. Germany's DAX jumped 5 percent. Benchmark indexes in France and Italy rose 4 percent.
In U.S. corporate news, seed company Monsanto rose 4 percent after it announced that its fourth-quarter results beat Wall Street's expectations. Wholesale club operator Costco Wholesale Corp. dropped 2 percent after its earnings came in at $1.08 per share, slightly below analyst's expectations of $1.10 per share. The company said it will raise its annual membership fees in November.
Yahoo gained 7.4 percent after Reuters reported that Microsoft is considering a bid for the company. BlackBerry maker Research in Motion jumped 10 percent on speculation that the company may also be for sale.