Stock market starts 3Q on high note

NEW YORK (AP) - The third quarter is starting on a positive note for the stock market after a mixed bag of economic data.

Major stock indexes rose more than 1 percent Wednesday after reports showing stabilization in manufacturing activity in the United States, Great Britain, and the 16 countries that share the euro currency. Investors also appeared pleased about a fourth straight monthly rise in pending home sales in May.

Not all economic data was upbeat, however. Construction spending fell in May by more than the market expected, and the private sector lost more jobs in June than anticipated. The most anticipated report of the week will come on Thursday, when the Labor Department releases its June jobs report.

Scott Fullman, director of derivatives investment strategy for WJB Capital Group, said the employment report — along with thin, pre-holiday trading volumes — could make for a volatile market Thursday. U.S. markets are closed Friday in observance of the Independence Day holiday.

Nonetheless, investors remain optimistic that the economy will be in better shape by the end of the year, and are looking to put money to work as the second half of 2009 gets underway, Fullman said.

"The belief is the worst is behind us," Fullman said.

In late morning trading, the Dow Jones industrial average rose 119.03, or 1.4 percent, to 8,566.03. The Standard & Poor's 500 index rose 10.90, or 1.2 percent, to 930.22. The Nasdaq composite index rose 24.32, or 1.3 percent, to 1,859.36.

Stocks had dropped sharply Tuesday on a disappointing report on consumer confidence, but ended the second quarter with significant gains. The benchmark S&P 500 index had its best quarter in a decade.

Bond prices were mostly lower on Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.59 percent from 3.54 percent late Tuesday.

In corporate news, Citigroup Inc. sold NikkoCiti Trust and Banking Corp., part of its Japanese business, to Nomura Trust and Banking Co. for $196 million. The New York bank, which has received $45 billion in government aid, has been selling assets and trying to streamline operations in an effort to return to profitability.

In an upbeat earnings report, General Mills Inc. said its fiscal fourth-quarter profit nearly doubled. The maker of Cheerios cereal and Yoplait yogurt also offered earnings guidance for 2010 above analysts' expectations. Shares rose $1.68, or 3 percent, to $57.70.

Analysts say earnings reports coming in the next few weeks will largely determine which way the market heads in the third quarter. Investors are especially eager to hear what companies have to say about business prospects in the second half of the year.

Markets have pulled a stunning recovery since hitting 12-year lows in early March. All the major indexes rose by double-digit percentage points in the second quarter, while the S&P 500 index and the Nasdaq composite index finished higher for the first six months of 2009.

Still, the major indexes have pulled back from multi-month highs in mid-June amid growing doubts about the strength of the economy's recovery.

The Russell 2000 index of smaller companies rose 11.30, or 2.2 percent, to 519.58.

The dollar was mostly lower against other major currencies, while gold prices rose.

Light, sweet crude rose 47 cents to $70.36 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 0.2 percent. In afternoon trading, Britain's FTSE 100 rose 2 percent, Germany's DAX index rose 2.2 percent, and France's CAC-40 jumped 2.5 percent.