* U.S. services sector surges to 11-month high
* Oil surges 2 pct to June highs
* Treasury yields rise after service sector data
* European markets rattled by ECB "taper" talk
(New throughout, updates to close of U.S. markets)
By Lewis Krauskopf
NEW YORK, Oct 5 Major U.S. stock indexes gained
on Wednesday, boosted by financial shares amid encouraging
economic data and by the energy sector as oil prices surged to
U.S. Treasury yields also rose after data showed U.S.
services sector activity rebounded to an 11-month high in
September, an encouraging sign for economic growth.
The Dow Jones industrial average rose 112.58 points,
or 0.62 percent, to 18,281.03. The S&P 500 gained 9.24
points, or 0.43 percent, to 2,159.73 and the Nasdaq Composite
added 26.36 points, or 0.5 percent, to 5,316.02.
"We're taking a little victory lap today after the
surprisingly good economic data," said Kim Forrest, senior
equity research analyst at Fort Pitt Capital Group in
U.S. stocks had been pressured this week by concerns over
Britain's exit from the European Union and expectations of a
Federal Reserve interest rate increase in the coming months.
Chicago Fed President Charles Evans said he would be "fine"
with raising U.S. interest rates by year-end if U.S. economic
data remained firm.
Traders see a 60-percent chance the Fed will hike at its
December meeting, according to the CME FedWatch website.
Financial shares, which tend to benefit in a rising rate
environment, climbed 1.5 percent, while the energy sector
gained 1.4 percent.
"People are certainly waiting for that inevitable interest
rate rise by the Fed, but I think they're just not sure if
that's a sign that things are better and earnings are likely to
improve, or a reason for people to sell stocks because rates are
rising," said Rick Meckler, president of LibertyView Capital
Management in Jersey City, New Jersey.
In Europe, bond yields jumped while the pan-European STOXX
index fell 0.6 percent. Markets were rattled by the
prospect of the region's central bank eventually winding down
its bond-buying stimulus.
A Bloomberg article on Tuesday cited sources as saying the
European Central Bank would probably wind down the monthly
80-billion euro ($90 billion) scheme gradually.
Italy's 10-year bond yield rose to 1.38 percent,
its highest level since late June, according to Reuters data.
Germany's 10-year Bund yield, the euro zone benchmark, rose more
than 8 bps to hit zero for the first time in a fortnight
"I am surprised at the reaction, but it's just this notion
that the ECB may be discussing tapering one day that has upset
the market," said ING rates strategist Benjamin Schroeder.
MSCI's gauge of stocks across the globe
climbed 0.2 percent after two sessions of declines.
Oil prices rose to their highest since June after the fifth
unexpected weekly drawdown in U.S. crude inventories added to
support on hopes that major producers will agree to cut output
The U.S. Energy Information Administration said crude
stockpiles fell 3 million barrels last week, opposite of
forecasts of analysts polled by Reuters for a build of 2.6
Benchmark Brent crude settled up 2 percent to $51.86
a barrel, while U.S. West Texas Intermediate crude
settled up 2.3 percent at $49.83 a barrel.
Benchmark U.S. 10-year notes fell 11/32 in price
to yield 1.72 percent, up from 1.68 percent late Tuesday.
The dollar was little changed against a basket of
currencies as the encouraging services sector data offset a
weaker-than-expected report on private-sector job growth.
Sterling rose 0.2 percent against the dollar, after
dipping below $1.27 and hitting a three-decade low against the
greenback during the session amid worries about Britain's EU
(Additional reporting by Barani Krishnan, Rodrigo Campos,
Richard Leong and Karen Brettell in New York and Nigel
Stephenson and Dhara Ranasinghe in London; Editing by Susan
Thomas, Nick Zieminski and David Gregorio)