* U.S. service sector unexpectedly picks up in July
* PayPal rises after raising profit outlook
* Moderna jumps on $3 billion share buyback plan
* Indexes: S&P 500 +1.56%, Nasdaq +2.59%, Dow +1.29%
Aug 3 (Reuters) - Wall Street ended sharply higher on Wednesday, with strong profit forecasts from PayPal and CVS Health Corp lifting sentiment and helping elevate the Nasdaq to its highest level since early May.
Data showed the U.S. services industry unexpectedly picked up in July amid strong order growth, while supply bottlenecks and price pressures eased. That supported views that the economy was not in recession despite output slumping in the first half of the year.
A fresh batch of strong results from companies including PayPal and CVS Health Corp boosted sentiment in a largely upbeat quarterly reporting season. Reports exceeding low expectations have helped Wall Street rebound from losses caused by worries about decades-high inflation, rising interest rates and shrinking economic output.
"We're going through Q2 earnings and, by and large, from the tech complex to consumer discretionary and industrials, we're seeing a lot of better-than-feared prints, and that's just good enough right now," said Sahak Manuelian, managing director of trading at Wedbush Securities in Los Angeles.
Apple and Amazon rallied almost 4%, while Facebook-owner Meta Platforms jumped 5.4%.
PayPal soared almost 10% after it raised its annual profit guidance and said activist investor Elliott Management had an over $2 billion stake in the financial technology firm.
CVS Health gained 6.3% after the largest U.S. pharmacy chain raised its annual profit forecast after posting strong quarterly results.
Manuelian said an additional factor behind Wednesday's stock rally was growing confidence among investors that the Fed has already carried out the bulk of the interest rate hikes that will be necessary to bring inflation under control.
Meanwhile, Richmond Federal Reserve President Thomas Barkin on Wednesday joined policymakers saying that the U.S. central bank is committed to getting inflation under control and returning it to its 2% target.
The S&P 500 climbed 1.56% to end the session at 4,155.12 points.
The Nasdaq gained 2.59% to 12,668.16 points, while Dow Jones Industrial Average rose 1.29% to 32,812.50 points.
Additional data on Wednesday showed new orders for U.S.-manufactured goods increased solidly in June and business spending on equipment was stronger than initially thought, pointing to underlying strength in manufacturing despite rising interest rates.
The most traded stock in the S&P 500 was Tesla , with $24.3 billion worth of shares exchanged during the session. Its shares rose 2.27%.
Of the 11 S&P 500 sector indexes, 10 rose, led by information technology , up 2.69%, followed by a 2.52% gain in consumer discretionary .
The S&P 500 has rebounded about 13% from its closing low in mid-June and would have to climb another 15% to get back to its record high close in early January.
Moderna Inc surged about 16% after the vaccine maker announced a $3 billion share buyback plan.
Regeneron Pharmaceuticals climbed 5.9% after it beat quarterly revenue estimates, while coffee chain Starbucks Corp rose over 4% after it reported upbeat quarterly profits.
Advancing issues outnumbered falling ones within the S&P 500 by a 3.7-to-1 ratio. The S&P 500 posted two new highs and 30 new lows; the Nasdaq recorded 51 new highs and 37 new lows.
Volume on U.S. exchanges was relatively heavy, with 11.7 billion shares traded, compared to an average of 10.7 billion shares over the previous 20 sessions.