Wall St up as service sector soothes

Specialist Peter Giacchi, left, works at his post on the floor of the New York Stock Exchange. File photo / AP

Wall Street advanced overnight, pushing the Standard & Poor's 500 Index to a record high, as the US services industry posted its highest reading in nine months.

The Institute for Supply Management's non-manufacturing index rose to 56.3 in May, up from 55.2 in April. Separately, the US trade deficit rose 6.9 per cent to US$47.2 billion in April as imports increased.

To be sure, US private employers added a lower-than-expected 179,000 jobs to their payrolls in May, down from 215,000 in April, according to the ADP national employment report. A Labor Department report on Friday is expected to show that US employers added 215,000 jobs in May, according to a Bloomberg News survey.

"May job growth may have been a little less than expected but with imports rising, it looks like the economy is moving forward solidly," Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, told Reuters.

In the final hour of trading in New York, the Dow Jones Industrial Average edged 0.04 per cent higher, the Standard & Poor's 500 Index rose 0.14 per cent, and the Nasdaq Composite Index added 0.37 per cent. The S&P 500 touched a record 1,928.63 earlier in the session.

Gains in shares of Travelers, up 1.3 per cent, and those of Nike, up 0.8 per cent, offset declines in shares of Cisco, down 1.1 per cent, and those of United Technologies, down 0.8 per cent.

The S&P 500 has risen more than 6 per cent since falling to a two-month low in April as investors ditched an array of momentum stocks. So far this year, the index is up 5.2 per cent. In comparison, the Dow is up just 2.1 per cent this year; the Nasdaq is up 2.3 per cent.

In Europe, the Stoxx 600 Index inched higher to close the session at 343.56. Germany's DAX rose 0.07 per cent. France's CAC 40 slipped 0.06 per cent, while the UK's FTSE 100 shed 0.3 per cent.

European Central Bank policy makers meet on Thursday and are widely expected to announce stimulus measures including a reduction of the central bank's key interest rate.

A report released on Wednesday showed gross domestic product in the euro zone grew 0.2 per cent in the first quarter, down from a revised 0.3 per cent increase in the previous three months.

Analysts are concerned about the spectre of deflation in the region. A report earlier this week showed that the pace of inflation fell to 0.5 per cent last month.

"We see a significant risk of a fall below zero," Jennifer McKeown, an economist at Capital Economics in London, referring to the inflation rate, told Bloomberg News. "While the ECB looks set to cut interest rates and announce some lending incentives after its meeting, we think that it will ultimately need to implement a large scale quantitative-easing program to counter the growing risk of deflation."