Stocks rise on recovery hopes

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NEW YORK (CNNMoney.com) -- Stocks climbed Wednesday, with investors starting off the third quarter on a positive note, after reports on manufacturing and housing added to bets that the pace of the recession is slowing.

The Dow Jones industrial average (INDU) gained 57 points, or 0.7%. The S&P 500 (SPX) index rose 4 points, or 0.4%, and the Nasdaq (COMP) climbed 11 points, or 0.6%.

Stocks ended an otherwise strong second quarter with losses Tuesday on a weaker-than-expected consumer confidence report and falling oil prices. But investors moved back into stocks Wednesday after manufacturing and housing reports showed the pace of the contraction in those sectors is easing.

"The market is more concerned about direction than magnitude," said Burt White, chief investment officer at LPL Financial. "Investors just want to see gradual improvement, that things are getting better."

He said that, in particular, the manufacturing report was driving stock gains Wednesday as it showed that the sector is continuing to dig its way out. He said he was also encouraged by the portion of the report that showed customer inventories are too low, which could suggest a pickup in production is on the way.

Gains were broad based, with 24 of 30 Dow stocks rising, led by IBM (IBM, Fortune 500), Coca-Cola (KO, Fortune 500), 3M (MMM, Fortune 500) and oil components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

Wall Street is coming off the best quarter in years. The S&P 500 gained 15.2% in the April-through-June period for its best quarter since the last three months of 1998. The Dow rose 11%, posting its best three-month period since the second quarter of 2003. The Nasdaq's 20% gain gave it its best quarter since the second of 2003.

Thursday preview: The June employment report, due out before the start of trading Thursday, is the week's biggest economic news. Employers are expected to have cut 363,000 jobs from their payrolls after cutting a much smaller-than-expected 345,000 in the previous month.

The unemployment rate, generated by a separate survey, is expected to have risen to 9.6% from a 26-year high of 9.4% in May.

Reports are also due on weekly jobless claims and May factory orders.

All financial markets are closed for the Independence Day holiday weekend.

Economy: Pending home sales rose 0.1% in May, the National Association of Realtors reported. Economists surveyed by Briefing.com thought sales would hold steady after rising a revised 7.1% in April. It was the fourth straight month of gains.

Manufacturing showed a small improvement in June. The Institute for Supply Management's manufacturing index improved to 44.8 from 42.8 in the previous month. Economists thought it would improve to 44.9.

Labor market: Employers in the private sector cut 473,000 jobs from their payrolls in June, according to a morning report from payroll services firm ADP. Economists surveyed by Briefing.com thought 394,000 jobs would be cut.

The report is seen as a precursor to the more widely watched government employment report due Thursday.

Another report showed that the number of announced job cuts fell in June for the fifth month in a row. Challenger, Gray & Christmas Inc. said cuts fell to 74,393, down 33% from May and 9% from a year ago.

Autos: Ford Motor (F, Fortune 500) said sales dropped 11% in June versus a year earlier, a more modest decline than it has shown in recent months.

But Ford was the exception, with most major automakers reporting bigger-than-expected declines as the industry continued to struggle.

General Motors (GM, Fortune 500) said sales fell 33% from a year ago. The automaker was in bankruptcy court for a second day Wednesday seeking approval for its restructuring plan.

Meanwhile, Chrysler said sales fell 42% in June versus a year ago.

On the move: A variety of tech shares rallied, including Dow components Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500) and Cisco Systems (CSCO, Fortune 500).

General Mills (GIS, Fortune 500) reported fiscal fourth-quarter profit nearly doubled from a year ago and issued a fiscal 2010 profit forecast that is above analysts' estimates.

But AIG (AIG, Fortune 500) shares slumped 22% in the aftermath of its annual meeting Tuesday, in which shareholders approved a proposal to put into effect a 1-for-20 reverse stock split. The shareholders also ousted the majority of the company's board at the meeting.

AIG, bailed out by the U.S. last fall, will remain under government control for the time being.

Market breadth was positive. On the New York Stock Exchange, winners beat losers three to one on volume of 950 million shares. On the Nasdaq, advancers topped decliners two to one on volume of 1.97 billion shares.

Commodities: Energy prices surged, with U.S. light crude oil for August delivery falling 58 cents to settle at $69.31 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery rallied $13.90 to settle at $942 an ounce.

Bonds: Treasury prices were little changed, with the benchmark 10-year note yield at 3.53%. Treasury prices and yields move in opposite directions.

Other markets: In global trade, Asian markets tumbled and European markets rallied.

In currency trading, the dollar fell versus the euro and gained against the yen.