Stocks edge up as jobs picture comes into focus

NEW YORK (CNNMoney.com) -- Stocks closed higher Wednesday, after trading in a narrow range for most of the day, as investors welcomed improved data on private sector hiring and the services industry.

The Dow Jones industrial average (INDU) rose 44 points, or 0.4%. The S&P 500 (SPX) index gained nearly 7 points, or 0.6%, and the Nasdaq (COMP) composite added 20 points, or 0.9%.

Stocks were supported by a larger-than-expected gain in private sector payrolls, which tempered concerns about the job market ahead of a key report due Friday from the Labor Department. In addition, an industry report showed the services sector of the economy grew in July for the seventh month in a row.

"Activity and employment may only be expanding at a modest pace," said Paul Ashworth, senior economist at Capital Economics in Toronto. "But at least today's data suggest that pace is being maintained."

After a spate of upbeat corporate earnings boosted the market last month, investors have become increasingly focused on the outlook for economic growth. In particular, traders are worried that the weak job market will undermine consumer confidence and hurt the already faltering recovery.

"The numbers were a bit better but they're still pointing to a very blah recovery," said Peter Boockvar, chief market strategist with Miller Taback & Co. "The economy is not falling off a cliff, but growth is going to be mediocre."

Investors will get another read on the job market Thursday when the government reports weekly initial claims data before the market opens. The retail sector will also be in focus when the nation's top chain stores report same-store-sales figures for July.

Stocks closed lower Tuesday, trimming some of the previous session's big gains, as disappointing reports on housing and consumer spending raised concerns about the strength of the economic recovery.

Economy: Payroll processor ADP said private-sector employers added 42,000 jobs to their payrolls in June, following an upwardly revised 19,000 increase in June. Economists surveyed by Briefing.com expected employers to add 25,000 jobs last month.

Separately, outplacement firm Challenger, Gray & Christmas said planned job cuts rose for a third straight month in July, fueled by continued weakness in the government and non-profit sector.

The reports came as investors awaited Friday's monthly jobs report from the Labor Department, one of the most closely-watched indicators on Wall Street. Economists believe U.S. employers cut payrolls for the second month in a row in July, and that the unemployment rate ticked up slightly.

Meanwhile, the Institute for Supply Management's services sector index rose slightly in July, marking the seventh consecutive month of growth in the sector.

The ISM services index increased to 54.3 last month from 53.8 in June. A reading above 50 indicates growth. Economists had expected the index to fall to 53.

While the rebound in the ISM was modest, the gain was encouraging for investors worried that the economy could slip back into recession.

"The fact that there was any rebound at all is important because it suggests the U.S. economy isn't spiraling back into the abyss after all," Capital Economics' Ashworth said in a research report.

Companies: Intel said it has agreed to settle antitrust charges levied by the Federal Trade Commission without paying a fine, though the chipmaker did agree to refrain from some activities designed to force its competition out of the market.

Intel was accused of refusing to sell chips to some computer manufacturers that also bought chips from rival companies and paying other manufacturers rebates in exchange for promises not to use microchips manufactured by Intel's competitors.

Shares of the Dow component were unchanged in afternoon trading.

Shares of Priceline (PCLN) were up more than 20% after the online travel company reported second-quarter results that easily beat analysts' expectations.

Goldman Sachs (GS, Fortune 500) gained 2% amid talk that the firm could spin off part of its proprietary trading business to get around the Volcker rule. Under the recently enacted Wall Street reform law, the Volcker rule will eventually limit the amount of money a federally insured bank can invest in risky ventures like private equity or hedge funds.

BP (BP) said Wednesday that the Gulf of Mexico Macondo well "appears to have reached a static condition -- a significant milestone," as a result of a procedure carried out Tuesday. Shares eased 1.5%.

Barnes & Noble (BKS, Fortune 500) put itself up for sale late Tuesday. The board of directors believes the bookseller's shares are "significantly undervalued." The company has hired financial adviser Lazard to explore "strategic alternatives," which may include selling the company. Shares rose 20%.

Earnings: Toyota Motor (TM) said that it swung to a profit in its latest quarter and boosted its full-year sales outlook. Shares rose more than 1%.

Time Warner (TWX, Fortune 500), the parent company of CNNMoney.com and Fortune, posted earnings of 49 cents per share on revenue of $6.4 billion, topping the consensus forecasts of analysts polled by Thomson Reuters. The media company also raised its outlook for earnings growth for all of 2010. Shares rose 2%.

World markets: European markets ended mixed. The CAC 40 in Paris and Germany's DAX both closed about 3% higher. Britain's FTSE 100 fell 0.2%.

In Asia, Japan's Nikkei sank 2.1%, while the Hang Seng in Hong Kong and the Shanghai Composite rose more than 0.4%.

Currencies and commodities: The dollar rose versus the euro and the British pound. It recovered against the Japanese yen after falling near a 15-year low earlier.

U.S. light crude oil for September delivery fell 11 cents to $82.44 a barrel.

COMEX gold's December contract rose $15.50 to $1,195.90 per ounce.

Bonds: Treasury prices eased, pushing the yield on the 10-year note up to 2.95% from 2.91% late Tuesday. Bond prices and yields move in opposite directions.