Wall St up as US services sector expands

Trader Gregory Rowe, left, and specialist Peter Giacchi work on the floor of the New York Stock Exchange. Photo / AP
Trader Gregory Rowe, left, and specialist Peter Giacchi work on the floor of the New York Stock Exchange. Photo / AP

Wall Street opted to focus on data showing the US services industry unexpectedly grew last month, underpinning hopes that American corporate profits can sustain growth in the face of the European debt crisis.

The Institute for Supply Management's services index inched higher to 53.7 in May from 53.5 in April. That compared with the median forecast of 75 economists surveyed by Bloomberg News for a decline to 53.4.

In late afternoon trading in New York, the Dow Jones Industrial Average gained 0.23 per cent, the Standard & Poor's 500 Index advanced 0.43 per cent and the Nasdaq Composite Index rose 0.46 per cent.

"The facts are telling you what we all know. There are a lot of places where there is weakness in our economy and others. With most things financially related, confidence is the game ... and if you can restore confidence, things get better quickly," Mark Lehmann, director of equities at JMP Securities in San Francisco, told Reuters.

The recent weakness in equities amid concern about the impact of Europe's crisis on growth globally, including in the US, has certainly helped make valuations more attractive. The S&P 500 traded at 12.9 times its companies' reported earnings, the lowest valuation since November, according to data compiled by Bloomberg.

In Europe, the Stoxx 600 Index ended with a 0.3 per cent increase for the day, helped by the direction on Wall Street and hopes that the Group of Seven is considering some sort of coordinated action to bolster growth.

Even Europe's largest economy is not immune to the impact of the crisis.

Government data showed today that Germany's factory orders, adjusted for seasonal swings and inflation, fell 1.9 per cent from March, when they rose a revised 3.2 per cent. The decline was larger than the 1.1 per cent drop economists polled by Bloomberg News had forecast.

Spain's fiscal woes however continue to be the centre of concern and show no sign of letting up. Spain said on Tuesday that credit markets were closing to the euro zone's fourth biggest economy, according to Reuters.

"The risk premium says Spain doesn't have the market door open," Spain's Treasury Minister Cristobal Montoro said on Onda Cero radio, according to Reuters. "The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt."

- BusinessDesk

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