After suffering their worst decline in three months on Tuesday, stocks received an early lift after payroll processor ADP said US private employers picked up the pace of hiring in February.
A report from The Wall Street Journal saying the US Federal Reserve is considering a new type of mortgage and Treasury bond-buying programme boosted stocks, particularly the financials.
Banking stocks – Tuesday’s big losers – were the strongest sector on Wednesday. The KBW bank index advanced 1.9 per cent. Morgan Stanley gained 3.2 per cent to $17.88 following a 5.3 per cent drop in the last session.
“Earlier in the week, portfolio managers, advisors and institutional money managers were looking for some sort of pullback just because it’s good to buy on the dip, and we’ve had such a nice run,” said Mark Martiak, senior wealth strategist at Premier Financial Advisors in New York.
“The right part of the economic good news, good data story was the private sector adding 216,000 jobs.”
The news comes after Fed chairman Ben Bernanke stirred caution among many in financial markets last week by giving no clear indication that he plans to spur faster growth by pushing for another round of asset purchases.
Improving economic figures have helped push the S&P 500 up more than 20 per cent from the October closing low.
Investors continued to eye signs of progress in negotiations between fiscally troubled Greece and private creditors that will result in a substantial write-down for Greece’s debt costs.
Tuesday’s tumble was prompted by renewed concerns about Greece and the outlook for the world economy. It was one of the worst performances since stocks began rallying in October and the third straight decline for the S&P 500. Six Greek pension funds are still holding out against joining the deal; eight have agreed to take part.
The Dow Jones industrial average rose 78.33 points, or 0.61 per cent, to 12,837.48 at the close. The Standard & Poor’s 500 Index climbed 9.27 points, or 0.69 per cent, to 1,352.63. The Nasdaq Composite Index added 25.37 points, or 0.87 per cent, to 2,935.69.
The PHLX housing sector index advanced 2.7 per cent, with Hovnanian Enterprises up 2.5 per cent at $2.46 after posting results.