US STOCKS-Wall St turns higher as services data lifts hopes of Fed rate cut

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* Sept. ISM services sector activity falls more than
expected
* Data boosts bets of interest rate cut in Oct.
* PepsiCo rises after quarterly beat
* Indexes up: Dow 0.07%, S&P 0.34%, Nasdaq 0.52%

(Adds comment, details; updates prices)
By Medha Singh and Arjun Panchadar
Oct 3 (Reuters) - U.S. stocks turned positive in choppy
trading on Thursday as U.S. services sector activity slowed to a
three-year low, raising expectations of another interest rate
cut by the Federal Reserve to stem a wider economic downturn.
Wall Street's main indexes dropped about 1% after the ISM's
non-manufacturing activity index for September fell to 52.6 from
56.4 the month before and below expectations of 55.0. Still, a
reading above 50 denoted an expansion in the sector.
But the indexes were back in the positive territory as bets
of a Fed rate cut in October jumped to 92.5% from 39.6% on
Monday, according to CME Group's Fed Watch tool. The Fed's next
policy meeting will be held at the end of the month.
"The degradation of the data, especially the
non-manufacturing data, kind of pushes that to the Fed doing
another cut," said Kim Forrest, chief investment officer at
Bokeh Capital Partners in Pittsburgh.
"This is very familiar to the post-2008 world where we get
bad news and the market rallies because we are anticipating a
rate cut."
Market participants now await a pivotal jobs report on
Friday after dismal manufacturing and hiring data triggered two
days of sharp losses, with the indexes recording their deepest
one-day percentage slide in six weeks on Wednesday.
PepsiCo Inc PEP.O rose 4.1% after the company beat
quarterly expectations as higher advertising and new low-calorie
versions of Gatorade boosted demand for its beverages in North
America. Its shares propped up the consumer staples .SPLRCS sector
by 0.75%. Nine of the 11 major sectors were higher.
The benchmark index is now 4.5% below its all-time high hit
in July even though it came within striking distance of that
level two weeks ago.
At 11:17 a.m. ET, the Dow Jones Industrial Average .DJI
was up 19.02 points, or 0.07%, at 26,097.64, the S&P 500 .SPX
was up 9.86 points, or 0.34%, at 2,897.47. The Nasdaq Composite
.IXIC was up 40.45 points, or 0.52%, at 7,825.70.
Leading the decliners on the S&P 500 was Corona maker
Constellation Brands Inc STZ.N , which fell about 6% as it took
a $839 million mark down in the value of its investment in pot
firm Canopy Growth WEED.TO during the quarter. Advancing issues outnumbered decliners by a 1.13-to-1 ratio
on the NYSE and a 1.12-to-1 ratio on the Nasdaq.
The S&P index recorded nine new 52-week highs and 20 new
lows, while the Nasdaq recorded two new highs and 82 new lows.

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