Wall Street rises on ADP jobs data and Fed's move

By Steven C. Johnson

NEW YORK (Reuters) - The Dow industrials and S&P 500 rose on Wednesday as a surprising increase in private-sector employment and central bank efforts to boost liquidity in stormy financial markets offset a surge in oil prices.

Bank stocks rose after the Federal Reserve and other central banks said they would boost measures to stabilize financial companies struggling with credit losses.

The price of oil rose nearly 4 percent after weekly inventory data showed a decline in gasoline stockpiles, sparking supply concerns.

While higher oil prices crimp consumer and business spending, they also boost shares of energy companies, which lifted the Dow and S&P. Shares of Exxon Mobil (XOM.N) climbed 4 percent and Chevron jumped 5 percent.

A private-sector employment report showing employers added 9,000 jobs in July set the tone early in the day. The data surprised economists, who had expected another month of job losses and raised hopes for a stronger-than-expected government jobs report on Friday.

"The ADP was encouraging. If they're on the right track and Friday's payroll number comes in better than expected, then that would be very positive," said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston.

The Dow Jones industrial average .DJI shot up 186.13 points, or 1.63 percent, to 11,583.69. The Standard & Poor's 500 Index .SPX advanced 21.06 points, or 1.67 percent, to 1,284.26. The Nasdaq Composite Index .IXIC gained 10.10 points, or 0.44 percent, to 2,329.72.

The rally accelerated in the last half hour of trading as traders reversed bets that stocks would fall, known as covering short positions. The late gains helped pull the Nasdaq out of negative territory.

Avon Products Inc (AVP.N) and diversified U.S. manufacturer SPX Corp (SPW.N) posted better-than-expected profits, providing bright spots among otherwise dismal second-quarter results. Avon's stock surged 17.4 percent to $44.11 on the New York Stock Exchange, while shares of SPX gained 10.7 percent to $133.52.

Financial shares advanced after U.S. securities regulators extended through August 12 an emergency rule aimed at curbing abusive short selling in the stocks of Fannie Mae (FNM.N), Freddie Mac (FRE.N) and 17 other major financial firms.

That, coupled with the Fed's move to extend liquidity to stressed banks shows officials "are doing their best to calm individual investors' fears that are still out there," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati.

Bank of America's (BAC.N) shares rose 4.3 percent to $33.61 while Citigroup (C.N) climbed 2 percent to $18.81. Merrill Lynch MER.N rose 2.5 percent to $26.91 as investors wondered whether the investment bank and brokerage has finished cleaning its balance sheet after saying it will write down $5.7 billion in credit losses and raise $8.55 billion by selling new stock.

Shares of Fannie Mae (FNM.N) rose 5.3 percent to $12.21 on the SEC's emergency extension of its short-sale rule as well as on news that President George W. Bush had signed into law a housing rescue plan passed by Congress, which includes a government lifeline to the two housing finance companies.

In the energy sector, Exxon Mobil shares gained 4.3 percent to $84.38, while Chevron surged 5.3 percent to $87.26. Their advance was in sync with the rebound in oil futures prices. U.S. crude oil for September delivery CLc1 gained $4.58, or 3.8 percent, to settle at $126.77 a barrel.

Laggards included Irish drugmaker Elan Corp (ELN.I)(ELN.N), whose U.S.-listed shares plunged 41.8 percent to $19.63 on the NYSE while the stock of U.S. pharmaceutical company Wyeth WYE.N dropped 11.9 percent to $39.74 after a drug trial showed the risk of a potentially serious side effect in a new Alzheimer's drug jointly developed by the companies.