Stock market shrugs off weak service sector report

NEW YORK (AP) ? Stocks are edging higher in afternoon trading Wednesday as investors shrug off a setback in the U.S. service sector.

The Institute for Supply Management reported that business growth slowed at U.S. service providers in June. Financial companies and health care providers reported the weakest results. The ISM report followed a broad sell-off in Europe and another interest rate hike in China.

In late afternoon trading, the Standard & Poor’s 500 index gained less than 1 point to 1,338.

The Dow Jones industrial average rose 47 points, or 0.4 percent, to 12,616. DuPont rose 2 percent, the most of any stock in the average, followed by Caterpillar Inc. and Intel Corp.

The technology-focused Nasdaq composite added 6, or 0.2 percent, to 2,831.

Some investors were surprised that stock indexes did not add to Tuesday’s modest declines following the weak economic report. Dorsey Farr, a co-founder of Atlanta investment advisory firm French Wolf & Farr, said attractive stock prices in technology and pharmaceutical companies helped the market rebound.

Financial companies fell sharply after Moody’s lowered Portugal’s credit rating to “junk” late Tuesday. That raised fresh concerns about the strength of the European financial system and investment banks’ exposure to possible bond defaults. The Euro Stoxx 50, an index of companies in countries that use the euro, fell nearly 1 percent. Bank of America Corp. lost 2.5 percent. JPMorgan Chase dropped 1.2 percent.

China also raised a key interest rate for the third time this year in an attempt to curb inflation. Many U.S. companies have focused on the country as a source of profit growth and are hoping that interest rate hikes there will not lead to an economic slump.

Among U.S. companies, General Motors gained nearly 2 percent after analysts upgraded the stock. Walgreen Co. rose 1 percent after the retailer said its June sales were higher than anticipated.

Business software maker Compuware Corp. rose 4.1 percent, the most of any stock in the S&P 500. Compuware bought dynaTrace for $256 million and said it expects the deal to more than double sales in the next year.

There are no major corporate earnings reports scheduled for this week. Aluminum maker Alcoa Inc. starts the earnings season off next week when it reports quarterly results.

The Dow climbed 648 points last week, its best week in two years. The gains came as Greece’s parliament approved budget-cutting measures needed before the country could receive another round of loans. Nike also reported strong earnings and automakers said their sales rose 7 percent in June compared with the same month a year ago.

The gains erased nearly six weeks of losses. The Dow is now up 9 percent for the year. The S&P 500 index is up 6.4 percent and the Nasdaq composite is up 6.7 percent.

Trading is light during the holiday-shortened week. Markets were closed in the U.S. on Monday for the July 4th holiday. Many investors are looking ahead to Friday’s employment report. Economists expect that the unemployment rate was 9.1 percent in June, unchanged from the month before.