* Services sector growth much higher than expected
* Financials rise on prospect of Fed rate hike
* Oil prices touch multi-month highs
* Indexes up: Dow 0.62 pct, S&P 0.43 pct, Nasdaq 0.5 pct
(Updates to market close)
By Rodrigo Campos
NEW YORK, Oct 5 Stocks on Wall Street rose
Wednesday led by the energy sector as oil prices rallied and as
financials gained on the increasing likelihood of an interest
rate hike after strong economic data.
Activity in the U.S. services sector hit an 11-month high in
September, an encouraging sign for economic growth that may
nudge the Federal Reserve toward an interest rate increase
before the year ends.
Banks, seen benefiting from an eventual rate hike,
gained 2 percent as a group -the most for any day in two months.
"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
She said expectations are rising for a pickup in corporate
earnings and "there are good signs in the economy."
Traders priced in a near 65 percent chance of a Fed rate
hike in December after the services data, according to the CME
Group's FedWatch tool. The chances had dipped earlier in the day
after data showed the U.S. private sector added slightly fewer
jobs than expected last month.
The higher chance of a Fed rate hike hurt rate-sensitive
sectors like real estate, which fell 1.9 percent.
"Looks as if we may have a rate increase some time in 2016
or early 2017," Forrest said. "The recent rise in the 10-year
yield tells you that if you've been buying some dividend-paying
stocks for yield alone, you may be in trouble."
The yield on the benchmark Treasury note touched
1.73 percent after having dipped under 1.54 percent on Friday.
The energy sector of the S&P 500 added 1.4 percent
as both Brent and U.S. crude oil rose to
multi-month highs after data showed a bigger-than-expected draw
in U.S. inventories.
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.
Just over 7 billion shares changed hands in U.S. exchanges,
compared with the 7.2 billion daily average over the last 20
Twitter rose 5.7 percent to $24.87 after the Wall
Street Journal reported it is expected to field bids this week.
Shares of Booz Allen Hamilton fell 3.8 percent to
$30.31 after news broke that an NSA contractor who worked for
Booz Allen was arrested in August and charged with stealing
highly classified information.
Booze Allen is the consulting firm that employed Edward
Snowden when he revealed the collection of metadata by the NSA
Salesforce dropped 5.8 percent to $68.42 after a
Mizuho analyst raised concerns over the company's eventual bid
Advancing issues outnumbered declining ones on the NYSE by a
1.55-to-1 ratio; on Nasdaq, a 2.19-to-1 ratio favored advancers.
The S&P 500 posted 24 new 52-week highs and five new lows;
the Nasdaq Composite recorded 117 new highs and 20 new lows.
(Reporting by Rodrigo Campos; Editing by James Dalgleish)