US STOCKS-Wall St cuts gains, Nasdaq off as oil offsets ADP jobs

* Oil rises sharply, driving the Nasdaq lower

* ADP shows employers unexpectedly added jobs in July

* Financials supported by Fed, SEC measures

* Dow up 0.6 pct and S&P up 0.5; Nasdaq falls 0.5 pct (Updates to midday)

By Walter Brandimarte

NEW YORK, July 30 (Reuters) - U.S. stocks cut gains while the Nasdaq slipped into negative territory on Wednesday as oil prices rose sharply, offsetting positive jobs data and efforts by U.S. officials to boost liquidity in turbulent financial markets.

Bank shares trimmed some of their earlier gains and energy companies' stocks rose as U.S. crude oil prices jumped more than $2 per barrel, after falling for most of the morning and closing sharply lower on Tuesday.

The spike in oil prices took some of the shine off an ADP Employer Services' report that showed that U.S. private-sector employers added 9,000 jobs in July, suprising economists who had expected a fall in that number.

The report encouraged investors to bet the government's more comprehensive labor market report due on Friday will paint a brighter picture for the U.S. economy -- supporting shares of consumer products companies such as General Electric Co (GE.N) and Procter & Gamble Co (PG.N).

"The ADP was encouraging. If they're on the right track and Friday's payroll number comes in better than expected, than that would be very positive," said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston.

The Dow Jones industrial average .DJI rose 66.44 points, or 0.58 percent, to 11,464.00, while the Standard & Poor's 500 Index .SPX added 5.96 points, or 0.47 percent, to 1,269.16. But the Nasdaq Composite Index .IXIC slipped 11.89 points, or 0.51 percent, to 2,307.73.

Shares of Exxon Mobil Corp (XOM.N) gained 1.4 percent to $82.05, driving the S&P 500 up.

Shares of financial companies were still supported by a decision by the U.S. Federal Reserve and other central banks to extend liquidity offerings to stressed banks and securities firms. For details, see [ID:nN30428742].

In addition, U.S. securities regulators extended through Aug. 12 an emergency rule aimed at curbing abusive short selling in the stocks of Fannie Mae FNM.N and Freddie Mac FRE.N, as well as 17 other major financial firms. [ID:nN29346987].

The combination of both measures "shows that the Fed and the SEC are really coming in trying to defend the stock market, and financials in particular, and doing their best to calm individual investors' fears that are out there still," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati.

Bank of America's (BAC.N) shares rose 1.5 percent to $32.70 while Citigroup (C.N) climbed 1 percent to $18.62. Merrill Lynch MER.N gained 0.3 percent to $26.33 even as investors wondered whether the investment bank and brokerage has finished cleaning its balance sheet after saying it will write down $5.7 billion related to credit losses and raise $8.55 billion by selling new stock.

Shares of Fannie Mae FNM.N rose 3 percent to $11.95 on the SEC's emergency extension of its short-sale rule as well as on news that President George W. Bush had signed into law a housing rescue plan passed by Congress, which includes a government lifeline to the two housing finance companies.

Shares of Elan Corp (ELN.I)(ELN.N) plunged 39.8 percent to $20.35 while Wyeth WYE.N dropped 12.6 percent to $39.46 after a drug trial showed the risk of a potentially serious side effect in a new Alzheimer's drug jointly developed by the companies. Wyeth was the biggest drag on the S&P 500.

Garmin Ltd (GRMN.O) was the biggest drag on the Nasdaq as its stock sank 19.1 percent to $36.48 after the maker of personal navigation devices slashed its profit and revenues forecasts for 2008. [ID:nBNG334425] (Additional reporting by Kristina Cooke; Editing by Jan Paschal)