Stocks rally after holiday weekend; investors await reading on services sector

Stocks climb in early trading to open week

NEW YORK — Stocks rallied in early trading Tuesday as investors try to recover some of the big losses that piled up in recent weeks following a string of disappointing economic reports.

The jump in stocks comes ahead of a report that is expected to show the service sector expanded last month, but not quite as fast as in May.

The services industry accounts for 80 percent of all employment, so growth in the sector could help calm worries about high unemployment following Friday’s disappointing government employment report.

Economic reports have routinely fallen short of economists’ forecasts in recent months. That has investors worried that the growth is not coming as quickly as expected and any expansion will be slow for a prolonged period.

Investors will closely be watching the Institute for Supply Management’s service-sector index report for any signs of improvement. Economists polled by Thomson Reuters expect the index likely dipped to 55 in June from 55.4 a month earlier. Any reading above 50 indicates the sector is growing. The report is due out at 10 a.m. EDT.

A better-than-expected report could provide investors with hope that private employers will start to increase the pace of hiring in the coming months, which would boost consumer confidence and likely spending as well. Consumer spending is the biggest driver of economic activity. Retailers report their monthly sales figures Thursday.

Overseas markets all rose as investors found stock prices more reasonable after the recent sell-off and Australia’s central bank provided a positive forecast for the country’s economy.

Australia’s economy is heavily reliant on exporting raw materials, so growth there has helped the sector. Energy and material stocks rose in early trading.

In early morning trading, The Dow Jones industrial average rose 98.84, or 1 percent, to 9,787.29. The Standard & Poor’s 500 index rose 12.45, or 1.2 percent, to 1,035.03, while the Nasdaq composite index jumped 32.70, or 1.6 percent, to 2,124.49.