Nasdaq, S&P hit five-year highs

NEW YORK – The Nasdaq composite and Standard & Poor’s 500 indexes closed at five-year highs Wednesday after a positive report on the economy’s service sector pushed stocks modestly higher. A jump in oil prices, however, minimized Wall Street’s gains.

The Institute for Supply Management’s service index, an important barometer of that sector’s activity, came in at 60.5 for the month, up from 60.1 in February and better than the 59 reading economists expected. The modest gains were enough to encourage Wall Street about that sector’s growth, but did not appear to reignite the market’s interest rate worries.

Yet trading remained tentative as the Energy Department’s weekly inventory report showed lower stockpiles of gasoline and distillate fuels, which drove up crude oil futures. A barrel of light crude settled at $67.07, up 84 cents, on the New York Mercantile Exchange – a 20 percent year-over-year rise.

“The tick up in oil prices hurts, but history has shown that interest rates have a much bigger impact on the stock market than oil,” said Jack Ablin, chief investment officer at Harris Private Bank. “And looking at the ISM services number, you’re seeing the kind of gradual, lazy improvement in the economy that’s not going to really get rates going.”

The Nasdaq gained 14.39, or 0.61 percent, to 2,359.75, its best close since Feb. 16, 2001, when it closed at 2,425.35.

The S&P added 5.63, or 0.43 percent, to 1,311.56, its best showing since May 21, 2001, when it finished at 1,312.83.

The Dow Jones industrial average rose 35.70, or 0.32 percent, to 11,239.55.

Bonds climbed higher, with the yield on the 10-year Treasury note falling to 4.85 percent from 4.87 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose, but remained below $600 per ounce.

The market’s activity – which had the major indexes seesawing through the early part of the session – could be attributed to investor unease ahead of Friday’s job creation report from the Labor Department. The report is a key indicator of the overall economy’s health, and Wall Street remained concerned that a very strong economy would prompt more interest rate hikes from the Federal Reserve.

With that uncertainty looming and stocks at or near five-year highs, investors were unlikely to push stocks substantially higher without at least some kind of retrenchment over the next few weeks, analysts said.

“Nobody likes to buy into a market that’s making new highs. People like to be in a market that’s making new highs,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati. “We’re pretty much at a top right now, and people are going to want to see a good-sized correction at some point before jumping in again.”

Advancing issues outnumbered decliners by nearly 5 to 3 on the New York Stock Exchange, where volume came to 1.62 billion shares, compared with 1.52 billion traded at the same point on Tuesday.

The Russell 2000 index of smaller companies rose 3.94, or 0.52 percent, to 766.26, an all-time high for the small-cap indicator.

Overseas, Japan’s Nikkei stock average fell 0.28 percent. In Europe, Britain’s FTSE 100 was up 0.66 percent, Germany’s DAX index rose 0.26 percent, and France’s CAC-40 climbed 0.29 percent.