Wall Street boosted by financial, energy stocks

By Yashaswini Swamynathan

(Reuters) - Wall Street rose for the first time in three days on Wednesday, powered by gains in financial and energy shares.

Activity in the U.S. services sector saw a big rebound in September, after having slowed to more than a six-year low in the previous month, a report from the Institute of Supply Management showed.

The data raised the prospects of a U.S. interest rate hike in the near term and comes before a carefully watched non-farm payrolls report on Friday.

Oil prices touched their highest levels since June following a bigger-than-expected draw in U.S. crude inventories.

"The markets are taking the economic news positively, but it is a double-edged sword in our opinion because a better economy means the Fed is going to finally start moving on rates," said Brad Lamensdorf, co-manager at Ranger Alternative Management in Connecticut.

Traders priced in a near 65 percent chance of a rate hike in December after the ISM report, according to the CME Group's FedWatch tool.

The odds had slightly fallen earlier in the day after data showed that fewer-than-expected jobs were added in the private sector last month.

A growing number of Fed officials have argued for a rate hike before the year ends as conditions in the labor market improve and inflation inches toward the central bank's 2 percent target.

The S&P financial sector rose 1.46 percent to more than a three-week high.

Wells Fargo and Bank of America rose 2.5 percent and were the top influences on the benchmark S&P 500 index.

Deutsche Bank's U.S.-listed stock was up 1 percent, while its Frankfurt-listed shares rose 2.6 percent.

The European Central Bank sees no risk of a banking crisis in the Euro zone despite some "individual cases" of lenders in trouble, ECB supervisor Ignazio Angeloni said.

At 11:03 a.m. ET (1503 GMT), the Dow Jones Industrial Average was up 103.82 points, or 0.57 percent, at 18,272.27.

The S&P 500 was up 9.03 points, or 0.42 percent, at 2,159.52.

The Nasdaq Composite was up 28.48 points, or 0.54 percent, at 5,318.14. Seven of the 11 major S&P 500 indexes were higher, with energy rising 1.4 percent. Exxon Mobil was up 0.6 percent and Chevron 0.9 percent.

Chesapeake Energy rose 5.8 percent and was the biggest gainer on the S&P.

High-dividend paying sectors telecom services, consumer staples and utilities were the worst hit.

Twitter rose 4.4 percent after the Wall Street Journal reported that the micro-blogging website is expected to field bids this week.

Advancing issues outnumbered decliners on the NYSE by 1,899 to 922. On the Nasdaq, 1,901 issues rose and 702 fell.

The S&P 500 index showed 15 new 52-week highs and four new lows, while the Nasdaq recorded 64 new highs and 15 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)