New York – Wall Street rallied for a second straight session Tuesday after easing wage pressures and stronger-than-expected service-sector activity raised prospects that the economy could cool gradually and leave room for the Federal Reserve to lower interest rates next year.
Investors applauded Labor Department figures showing wages and benefits increased at a much slower pace in the third quarter than had been estimated. Recent concerns about inflation had eroded some hopes that the Federal Reserve would start lowering interest rates next year. The central bank has said inflation remains its primary concern.
Meanwhile, the Institute for Supply Management, a trade group, found activity in the nation’s services sector rose at a faster rate in November, giving a further boost to investor sentiment. An index reading of 58.9 was above the 55.5 that had been expected and the 57.1 seen in October.
“Certainly that ISM number was a nice surprise to the upside, but for me the numbers that were more important were the unit labor costs and the productivity number” from the Labor Department, said Scott Wren, senior equity strategist for A.G. Edwards & Sons. “You’re not getting as big a kicker off this data as you might have six months ago because the market is pretty fairly valued.”
The Dow Jones industrial average rose 47.75, or 0.39 percent, to 12,331.60. A 2.5 percent increase from Coca-Cola Co. and a 2.3 percent rise from Walt Disney Co. helped the blue- chip average.
Broader stock indicators also rose. The Standard & Poor’s 500 index gained 5.64, or 0.40 percent, to 1,414.76. The index hit a six-year high of 1,415.27. The Nasdaq composite index was up 3.99, or 0.16 percent, at 2,452.38.
The dollar firmed against other major currencies, while gold prices fell.
