Stocks Gain Despite Oil's Rise

The Fed will continue its emergency lending program for Wall Street banks. An report from ADP showed an unexpected uptick in hiring

by Ben Steverman

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Stocks moved higher Wednesday on a better-than-expected report on private-sector jobs and news that the Federal Reserve will continue its emergency lending facility, a lifeline to troubled Wall Street firms.

The U.S. ADP report showed private payrolls rose 9,000 in July, following a 77,000 drop in June. Manufacturing firms lost 49,000 jobs, but service companies added 74,000. The news raised hopes that the crucial July labor market report, due Friday, will also beat expectations.

Since the financial crisis heated up earlier this year, the Federal Reserve has allowed investment banks to go to the Fed for emergency loans and also to temporarily swap risky debt for safe Treasuries. Those programs, set to expire in September, will continue through Jan. 30, 2009.

"The extension ... suggests that the Fed remains very concerned about financial stability," says John Ryding of RDQ Economics. "This announcement further suggests that the FOMC would be unlikely to be willing to tighten policy [by raising interest rates] any time soon," he also wrote.

On Wednesday, the Dow Jones industrial average rose 186.31 points, or 1.63%, to 11,583.69. The broader S&P 500 was up 21.07 points, or 1.67%, to 1,284.26. The tech-heavy Nasdaq composite index was a relative laggard, gaining 10.1 points, or 0.44%, to 2,329.72.

Equity traders shrugged off an increase in oil prices. On the NYMEX, crude oil for September delivery jumped $4.58 to $126.77 per barrel. A drop in U.S. gasoline supplies suggested Americans may be driving more than expected.

Also Wednesday, the SEC extended restrictions on so-called 'naked' short-selling of shares of investment banks and mortgage financiers Fannie Mae (FNM) and Freddie Mac (FRE). The rules will now be in effect through Aug. 12, but won't be extended.

Among stocks in the news, Office Depot (ODP) posted earnings of 4 cents per share, vs. 41 cents a year ago, as same-store sales fell 10% and total sales dropped 1%.

Comcast Corp. (CMCSA) posted earnings of 21 cents per share, vs. 19 cents a year ago, as revenue rose 11%.

Garmin Ltd. (GRMN) reported earnings of $1.19 per share, vs. 98 cents a year ago, as revenues rose 23%. But the company warned that economic conditions and high fuel costs had slowed its growth.

Dreamworks Animation SKG (DWA) reported earnings of 30 cents per share, vs. 60 cents a year ago, as revenue fell 37%. A $150 million stock buyback program was announced. The firm noted the better-than-expected performance of its movie "Kung Fun Panda," but warned of higher worldwide theatrical marketing expenses this quarter due to strong foreign currencies.

Electronic Arts (ERTS) posted earnings of 42 cents, vs. 22 cents a year ago, as revenue rose 41%.

MetLife (MET) posted earnings of $1.30 per share, vs. $1.72 a year ago. The insurance firm lowered its full-year earnings guidance.

Interpublic Group of Companies (IPG) reported earnings of 17 cents per share, vs. 24 cents a year ago. Taxes offset an 11% rise in revenue. The company says it is on track to meet its 2008 financial objectives.

Major European indexes rose Wednesday. In London, the FTSE 100 index gained 1.91% to 5,420.70. In Paris, the CAC 40 added 1.85% to 4,400.55, while Germany's DAX index rose 0.96% to 6,460.12.

In Asia, Japan's Nikkei 225 was up 1.58% to 13,367.79, while Hong Kong's Hang Seng Index rose 1.94% to 22,690.60.

Treasury market

Treasury prices barely budged Wednesday. The two-year Treasury was flat at 100-07/32 for a yield of 2.63%; while 10-year notes fell 02/32 at 98-20/32 for a yield of 4.05%; and the 30-year bond dropped 11/32 to 95-22/32 for a yield of 4.65%.

Steverman is a reporter for BusinessWeek's Investing channel.