A bigger-than-expected jump in US factory orders helped propel Wall Street in a day of trading shortened before a national holiday, supported by optimism that help from policy makers is at hand.

A Commerce Department report showed that orders to factories rose 0.7 per cent in May, surpassing expectations for a 0.1 per cent advance.

Wall Street closed early on Tuesday and will be closed Wednesday for the July 4th holiday. At the New York close of 1pm, the Dow Jones Industrial Average was up 0.56 per cent, the Standard & Poor's 500 Index gained 0.62 per cent while the Nasdaq Composite Index rose 0.84 per cent.

"The factory orders report was a good surprise," Richard Sichel, chief investment officer at Philadelphia Trust, told Bloomberg News. "Investors are also finding comfort in central bank action. The Fed has anticipated that they will do whatever it takes to not let the economy slip, China is doing the same and that the Europeans seem to be doing that too."


Investors are keen to gauge the performance of the US jobs market last month, as indicated by Labor Department data due on Friday.

American employers are expected to have added 90,000 new workers to their payrolls, according to a Reuters survey of economists. After rising by 275,000 in January, hiring has slowed in every month since February, while the 69,000 jobs created in May were the fewest in a year.

In Europe, the Stoxx 600 Index closed with a 1 per cent increase for the day.

Investors are betting on a cut in interest rates by the European Central Bank on Thursday, while the Bank of England will also announce a decision on rates that day.

The ECB is expected to lower its key rate by 25 basis points to a record low 0.75 per cent, while there are hopes the UK's central bank will ease borrowing costs too. Tempering expectations, IMF Managing Director Christine Lagarde told CNBC that she didn't think that Europe's central bank necessarily needed to cut its key rate, already at a record low, at this point.

Gold benefited from expectations that central banks will act to prop up economic expansion. Gold futures for August delivery climbed 1.5 per cent to settle at US$1,621.80 an ounce on the Comex in New York.

"People are expecting some form of easing both in the US and Europe," Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago, told Bloomberg News. "The chatter is growing louder."

Meanwhile, Brent crude oil topped US$101 a barrel for the first time in three weeks, helped by concerns over supply.