Stocks Extend Rally as Data Shows Improvement

Stocks accelerated gains in the final stretch of trading on Wednesday and closed near session highs as the latest economic data eased some concerns about the U.S. economy.

The Dow Jones Industrial Average closed near its 10,951 peak of the day, gaining 131 points, or 1.2%, to 10,940. The S&P 500 added 20 points, or 1.8%, at 1144 and the Nasdaq rose 56 points, or 2.3%, to 2461.

Stocks across the basic materials and tech sectors showed the strongest gains of Wednesday's session. Within the Dow, Cisco Systems (CSCO), Hewlett-Packard (HPQ) and Intel (INTC) were the high fliers alongside Walt Disney(DIS), Chevron(CVX) and Alcoa(AA). Twenty-four of the Dow's 30 components moved higher.

Market breadth was decidedly positive. Of the 5.2 billion shares that traded on the New York Stock Exchange, 71% gained ground while only 27% declined. On the Nasdaq, 2.5 billion stocks changed hands.

Earlier, Automatic Data Processing(ADP) said U.S. companies added 91,000 jobs in September, rising from the revised 89,000 in August and beating the 75,000 economists surveyed by Thomson Reuters had estimated.

An estimate of planned job cuts in September offered reasons to be cautious even though ADP numbers pointed to slight improvements in the jobs market. Consulting firm Challenger, Gray & Christmas said companies announced 115,730 layoffs in September after planning 51,114 job cuts in August. The number of announced layoffs jumped to the highest level since April 2009, when 132,590 cuts were announced. The government will release its employment report for September on Friday.

The Institute for Supply Management also released its non-! manufact uring index, which measures the service industry. The gauge fell to 53 in September, as economists predicted, from 53.3. While the index fell, readings above 50 indicate the industry grew.

Despite upward momentum seen Wednesday, investors were wary that the market could reverse anytime. "Volatility is so high that a rally can turn on a dime," says Jeffrey Friedman, senior market strategist at MF Global. "Without more encouraging news from Europe, it's hard to feed the bull," he added.

Friedman explained that yesterday's late day surge spooked investors who were shorting the market. The "double dip pro camp" continues to run for cover today, he added.

Recent developments in Europe tempered the sentiment on Wednesday. Late Tuesday, ratings agency Moody's cut Italy's debt rating three notches to A2, saying the country faces challenges in reducing its debt amid sluggish economic growth even though the risk of an Italian default remains "remote." Investors continued to monitor talks of a concerted bank recapitalization to reduce uncertainty in the European debt crisis.

On Wednesday, London's FTSE closed up 3.1% while Germany's DAX gained 4.5%. Asian markets closed lower with Japan's Nikkei Average off 0.86%.

The Belgian-French lender Dexia has become the first European bank to require a government intervention because of the European debt crisis. The bank will likely be broken up, with its troubled assets pooled separately, allowing it to sell its healthy operations. The lender, which was also rescued by France and Belgium in 2008, said Tuesday that it would take "all necessary measures" to guarantee its loans.

Dexia's troubles are the latest sign that the debt crisis has spread to the core of the eurozone financial system.

In corporate news, New York Attorney General Eric Schneiderman and the city of New York are suing Bank of New York Mellon(BK) for near! ly $2 bi llion, for allegedly defrauding clients in foreign currency exchange transactions. Bank of New York Mellon's stock lost 2.9% to $18.28.

Shares of Monsanto(MON) rose 5.2% to $66.25 after the fertilizer company forecast earnings growth in the mid-teens for its next fiscal year and reported a fiscal-fourth-quarter loss of 22 cents a share, less than 27-cent loss analysts had expected.

Costco(COST), the warehouse retailer, said net income in the fourth quarter rose about 10.6% as sales jumped 17%. Net income in the fourth quarter was $478 million, or $1.08 a share, compared with $432 million, or 97 cents, a year earlier. Analysts surveyed by Thomson Reuters expected Costco to earn $1.10 a share. The stock was off by 1.7% at $80.25.

Shares of Walt Disney(DIS) were rose 5.5% to $31.51 after Citigroup upgraded its rating on the stock to "buy" from "hold." Citigroup said the media company's shares have retreated from recent highs, creating a buying opportunity.

Acme Packet(APKT), a provider of network services, gave a disappointing fiscal-third-quarter forecast. The company expects earnings of 20 cents to 22 cents a share, excluding certain items, for the fiscal third quarter on revenue of $70 million, less than the estimates of analysts polled by Thomson Reuters for a profit of 30 cents on revenue of $82.8 million. Shares fell 5.5% to $40.46.

The benchmark 10-year Treasury was down 20/32, pushing the yield to 1.893%. The dollar index, which measures the dollar against six currencies, was off by 0.147%.

Gold for December delivery added $25.60, or 1.6%, to settle at $1641.60 an ounce.

The November crude oil contract gained $4.01, or 5.3%, to close at $79.68 a barrel.

.