Stocks extend advance to 4th day on stronger growth in services industries; mergers boost mood

Stocks rise after improved services report

NEW YORK — An upbeat report on services industries and more takeover news boosted stocks for a fourth day.

The Dow Jones industrial average climbed nearly 30 points in afternoon trading Wednesday to erase its losses for 2010. The Dow had also traded above its 2009 close on Tuesday but lost most of its gains to a late slump, leaving the index still in the red for the year.

More indicators of a slow but steady recovery in the economy helped ease concerns that have dogged the market since early this year. Major stock indexes have climbed to their highest levels since mid-January, when the Standard & Poor’s 500 index began a 9.2 percent pullback on concerns that the market was getting too far ahead of the still-struggling economy.

The Institute for Supply Management said its services index for February rose to 53 from 50.5 in January. Economists had forecast that the index would hit 51. Growth in services industries is seen as crucial for a rebound.

A steady stream of corporate deals gave more support to the market, as occurred earlier in the week. Acquisitions signal that businesses are confident in the economy and see some companies as undervalued. In the latest deal, private equity firm Elliott Associates offered to buy the 91.5 percent of software maker Novell Inc. that it doesn’t already own.

Separately, a report on the labor market came in as expected. Payroll company ADP said employers cut 20,000 jobs last month.

The ADP report is seen an early indicator of the government’s closely watched monthly employment report, though there are often wide variations. The Labor Department is expected to report on Friday that the unemployment rate edged up to 9.8 percent last month and that employers cut 50,000 jobs. The struggling labor market is still one of the biggest concerns for investors.

Meanwhile, austerity measures announced by Greece allayed some of the market’s worries about the global economy. Investors have been trying to determine whether problems there will spill over to other economies.

“People are feeling better about the recovery,” said Nick Kalivas, vice president of financial research at MF Global in Chicago. Kalivas said the week’s merger news has reassured investors that stocks aren’t overpriced because companies are still willing to pursue deals.

“It’s causing people to get excited about owning stocks and I think it shows that there might be some value here,” Kalivas said.

In afternoon trading, the Dow rose 28.41, or 0.3 percent, to 10,434.39. It is now up less than 0.1 percent for 2010.

The broader Standard & Poor’s 500 index rose 4.42, or 0.4 percent, to 1,122.73, while the Nasdaq composite index rose 6.28, 0.3 percent, to 2,287.07.

Bond prices slipped, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.64 percent from 3.61 percent late Tuesday.

The dollar was mixed against other major currencies. Gold rose.

Crude oil rose $1.30 to $80.88 per barrel on the New York Mercantile Exchange.

A recent surge in dealmaking has investors upbeat about growth potential. CF Industries made a new offer for Terra Industries, which last month agreed to be sold to Norway’s Yara for $4.1 billion. Dow Chemical Co. Bain Capital agreed to buy a plastics business from Dow Chemical Co. for $1.63 billion.

Among stocks, Novell jumped $1.34, or 28.1 percent, to $6.09.

Two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 526.3 million shares.

The Russell 2000 index of smaller companies rose 3.71, or 0.6 percent, to 652.02.

Britain’s FTSE 100 rose 0.9 percent, Germany’s DAX gained 0.7 percent, and France’s CAC-40 rose 0.8 percent. Japan’s Nikkei stock average rose 0.3 percent.