Stocks opened sharply higher Wednesday after a better than expected reading on a key gauge of service-sector activity. Market players were also weighing data on U.S. employment, productivity and labor costs, and factory orders.

Lingering hopes for a fruitful solution to bond insurer Ambac Financials («www.businessweek.com») liquidity troubles continued to provide some support to the market after boosting shares late Tuesday, reports Action Economics.

Networking giant Cisco («www.businessweek.com») offered a more upbeat assessment of its growth prospects. Discounter Costco («www.businessweek.com») enjoyed strong earnings.

Bonds were mixed before the release later Wednesday of the Federal Reserves Beige Book report on the U.S. economic outlook. The dollar index was seesawing higher. Gold futures reached a record high, while oil futures soared as OPEC left output quotas unchanged.

On Wednesday, the Dow Jones industrial average was higher by 71.64 points, or 0.59%, at 12,285.44. The broader S&P 500 index added 9.71 points, or 0.73%, to 1,336.46. The tech-heavy Nasdaq composite index gained 19.84 points, or 0.88%, to 2,280.12.

Trading was active, with telecom and oil stocks gaining; biotechs were lower. On the New York Stock Exchange, 17 shares were advancing in price fro every 9 that declined. Nasdaq breadth was 13-8 positive.

According to a report on CNBC, a consortium of banks looking to bail out Ambac was working to finish deal on Wednesday.

The ADP National Employment Report private sector employment index fell 23,000 in February. The estimated change in employment from December 2007 to January 2008 was revised down 11,000 to 119,000. February’s decline of 23,000 signals a deceleration of employment growth across businesses of all sizes. ADP said employment in the service-providing sector of the economy grew 47,000, while employment in the goods-producing sector declined 70,000, the 15th consecutive monthly decline. Manufacturing

employment fell 40,000 in February after declining a revised 3,000 in January.

Challenger, Gray & Christmas said planned corporate job reductions numbered 72,091 in February, down by about 4% from January’s announced cuts and “well below” recessionary levels.

Productivity growth in the non-farm business sector in the fourth quarter was revised to 1.9% in the 2007 fourth quarter from the original estimate of 1.8%, according to a government report. The consensus was for no revision. Unit labor costs were revised upward to 2.6% because of an upward revision to hourly compensation. The data are highly volatile on a quarterly basis, says S&P Economics; over the last four quarters, productivity is up 2.9% and unit labor costs are up 0.9%, indicating little inflationary pressure from the labor market.

U.S. factory orders fell 2.5% in January after a revised 2.0% jump in December (2.3% previously). The previously reported 5% decline in January durable goods orders was revised to -5.1%. Excluding transportation, factory orders were down 0.4%.

The U.S. composite ISM-nonmanufacturing index rose to 49.3 in February, after plunging almost 9 points to 44.6 in January. The business activity index climbed back to expansionary territory at 50.8 from 41.9. The employment index rebounded to 46.9 from 43.9. New orders were up 49.6 from 43.5. Prices paid surprisingly fell to 67.9 from 70.7. The data are much better than expected, according to Action Economics.

Oil futures were higher after OPEC ministers agreed to leave quotas unchanged, which was no real surprise. The market was awaiting weekly Energy Dept. inventory data. April WTI crude futures up 85 cents to $100.37.

Among Wednesdays stocks in the news, Pfizer («www.businessweek.com») reaffirmed its $1.78-$1.93 2008 EPS (reported) guidance range, $2.35-$2.45 adj. EPS, on revenue in the range of $47-$49 billion. PFE says it expects its pipeline of drugs in Phase III trials to grow to 24-28 programs by the end of 2009.

BJ’S Wholesale («www.businessweek.com») posted fourth-quarter EPS of 80 cents, vs. 18 cents one year earlier, (including items) on 5.4% higher same-store sales (incl. gas and pharmacy) and 1.9% higher total sales. Separately, the company reported a 5.9% gain in same-store sales for February.

Saks («www.businessweek.com») posted fourth-quarter EPS of 26 cents, (including a 7-cent gain) vs. 14 cents one year earlier on 9% higher same-store sales. The company expects same-store sales percentage growth in the mid-single digits for fiscal 2009. The company posted 3.4% higher February same-store sales.

European indexes were higher Wednesday. In London, the FTSE 100 index gained 1.17% to 5,835.00. In Paris, the CAC 40 index rose 1.83% to 4,761.69. Germanys DAX index added 1.92% to 6,670.83.

Asian indexes ended with modest losses. Japans Nikkei 225 index fell 0.126% to 12,972.06. In Hong Kong, the Hang Seng index declined 0.02% to 23,114.34.

Fidelity Investments was reopening its flagship Magellan mutual fund to new investors Tuesday, hoping to capitalize on the rejuvenated performance of the iconic fund to tap into a new generation of workers.

While Fidelitys mutual fund offerings posted strong performances in 2007, big competitors such as Vanguard Group and American Funds have been much more successful in recent years in attracting cash.

Last year through November, for example, Vanguard took in $70.6 billion in new money, compared to just $2 billion for Fidelity.

It has been six years since Fidelity ceded its crown to Vanguard as the worlds largest manager of stock and bond funds.

One reason why: Until Monday, half of Fidelitys largest, most popular funds were closed to new investors. Fund companies stop the flow of new money into funds when their size becomes too unwieldy for the manager to invest all that cash.

Closing a fund can help its performance, but at the cost of shutting out new customers.

Magellan, which has been closed to new investors since 1997, now has about $45 billion in assets, less than half the amount of money it held at its peak. About 85 percent of its assets are held in 401(k) accounts and similar retirement savings plans.

With the first wave of baby boomers reaching retirement age, many of the funds investors are beginning to tap their retirement savings and redeem their shares. That has frustrated Magellans manager, Harry Lange, by forcing him to sell shares to pay for those redemptions.

“I sold a lot of stocks I would have preferred not to,” Lange said Monday. “It was getting into the meat and bones” of the fund.

Reopening Magellan also is a declaration of confidence in Langes performance, after Magellan returned 18.8 percent to investors last year versus just a 5.5 percent gain for the broader stock market, as measured by the Standard Poors 500 index.

The performance is part of an overall improved record at Fidelity, following a push to beef up its stock research staff.

The gains come at an important time for Fidelity, which was rocked by management changes last year as it responded to growing competition and uncertainty surrounding the future of the family-controlled company and its chief executive, 77-year-old Edward Johnson 3rd.

Fidelity manages hundreds of funds, with varying investment philosophies, that it sells directly to consumers and through financial advisers.

But Magellan captured the popular imagination in the 1980s, when it was managed by Peter Lynch.

Lynchs folksy investment advice and spectacular results - he averaged returns of almost 30 percent a year during his 13-year tenure - turned him and the fund into a star.

However, Lynchs record was not the best career performance turned in by a Magellan manager; that honor belongs to his boss, Johnson, who averaged returns of 30.5 percent when he ran the fund in the 1960s.

Fidelitys equities chief, Walter Donovan, said Monday there were no plans to reopen the $80.9 billion Contrafund, or another large product, Low-Priced Stock fund, with $35.2 billion, though Fidelity will continue to review both portfolios.

Analysts who follow Fidelity say Magellan is uniquely positioned to take new money compared with the other two, however. For one thing, Langes aggressive investing style has kept just 1 percent of its total assets in cash, forcing him to sell shares more often to pay for redemptions.

HONG KONG: The rebound in the Hong Kong share market has renewed hopes among capital-hungry Chinese companies seeking to list in Hong Kong, but investors are wary after the poor trading performance of this years market newcomers.

That skepticism means that two China retailers, E-Land Fashion China Holdings and Maoye International, face challenges as they begin marketing deals this week that would be Hong Kongs first initial public offerings since March.

“If the stocks debut or postmarket performance trades below the offering price, why should I buy during the IPO? I can buy after it lists,” said Adam Tam, fund manager at Pacific Sun Investment Management in Hong Kong.

Six companies have listed in Hong Kong this year but only one, China Railway Construction, trades above its offering price.

Even shares in once-hot consumption investments, which provide exposure to surging domestic demand in China, have cooled. The snack maker Want Want China, for example, trades 3.7 percent below the offering price in its $1 billion IPO last month.

That kind of performance has meant eight Hong Kong IPOs worth a combined $7 billion have been withdrawn or postponed since the start of the year, according to Thomson Reuters data.

The Hang Seng index lost 18 percent in the first quarter of the year but has gained 9 percent in April.

“Though IPO valuations are attractive now, they are not must-buy, as upcoming listing candidates are not market leaders,” said Tam, who attended Maoyes scaled-back investor presentation on Monday.

Maoye, the department store operator, is raising as much as $420 million, less than half its earlier target, in a deal handled by Goldman Sachs, HSBC and UBS.

Maoyes IPO price range represents a price/earnings multiple of 19.7 to 25.8 times the IPO sponsors earnings forecast for 2008, compared with its P/E valuation of 29 to 37.7 when it originally began a $905 million offering in January.

By comparison, Chinas top department store, Parkson Retail Group, trades at 34.8 times 2008 prospective earnings, while Golden Eagle Retail Group trades at 27 times.

“Chinese consumption stocks are not defensive plays anymore, as some of them face price cap policies imposed by the Chinese government - they are also facing policy risk,” said Michael Chung, fund manager at Iventure Investment Management.

Beijing caps the retail prices of some goods in order to curb inflation, meaning retailers cannot pass higher costs onto customers, which squeezes margins.

Chung said he was choosing consumption-related stocks based on fundamentals instead of buying the entire sector. He also said demand for new issues would be crimped by investor reluctance to lock up funds for IPO applications if there were only prospects for low returns on their IPO shares.

Numerous Hong Kong investors have been burned after borrowing heavily to apply for shares in hot IPOs.

Last year, the Hong Kong exchange was third busiest for IPOs, after London and Shanghai.

“Investors buying IPOs closely track market sentiment,” said Antonny Cheng, managing director at Gain Asset Management.

“Last year, everyone flocked into IPOs no matter whether the company quality was weak. Now, there is no such sentiment.”

Institutional investors, meanwhile, have grown risk-averse as they manage the global credit crunch, he added.

Chinas department store sales are expected to total 682 billion yuan, or $98 billion, in 2010, an increase of 72.5 percent from 2005, or a compound annual growth rate of about 11.5 percent, Euromonitor says.

Several Chinese retail operators hope that kind of growth is enough to entice investors.

The womens apparel retailer E-Land, a unit of the South Korean E-Land World Group, plans to kick off its $369 million Hong Kong IPO roadshow on Wednesday, according to a document obtained by Reuters that details the terms of the deal. Its deal is being handled by Citigroup, Goldman Sachs and UBS.

Artini International Group, which sells fashion accessories, began premarketing for its $100 million to $200 million Hong Kong IPO on Monday and plans to start its formal roadshow on April 28. The company is scheduled to start trading on May 16.