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The ADP Employer Services private sector jobs report on Wednesday comes two days ahead of the U.S. government's closely watched payrolls report. Many economists raised their forecasts for a wider reading of jobs growth on Friday.

"Sometimes numbers come as bolts from the blue; this is one of them," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

"Nothing in any other indicators of the state of the labor market last month -- jobless claims, help wanted, surveys -- suggested anything like this was remotely likely."

In another sign of strength in the U.S. economy, an industry group on Wednesday reported its gauge of the massive U.S. services sector reached its highest level in over four years.

The data sparked a sharp cut in prices of U.S. Treasury debt as investors bet on a stronger recovery.

The U.S. dollar gained more than 1 percent against the yen and the euro. Stocks reversed losses and posted moderate gains on the data.

Private employers added a surprising 297,000 jobs last month, the biggest rise ever and up from a gain of 92,000 in November, the ADP data showed. The ADP data goes back to 2000.

Shortly afterwards, the Institute for Supply Management said its index of national services activity rose to 57.1 in December from 55.0 in November -- better than economists' median forecast of 55.6.

The data was the latest in a series, ranging from trade to retail sales, suggesting the U.S. recovery is gaining speed.

"Yet another number that beats consensus and keeps the positive sentiment on the economy alive with some momentum going into the new year," Sean Incremona, an economist at 4Cast Ltd in New York, said of the service sector data.

The government's comprehensive labor market report, which includes both public and private sector employment, is due on Friday. Analysts polled by Reuters expect it to show a rise in overall nonfarm payrolls of 140,000 in December, including a rise in private payrolls of 145,000.

"We now have to expect a much bigger number on Friday, 250,000?" said High Frequency's Shepherdson.

Adding to the rosy employment picture, the number of planned layoffs at U.S. firms fell last month to the lowest level in 10 years, according to a report by consultants Challenger, Gray & Christmas Inc.

And a survey of chief executives of small companies showed a majority planned to add employees in 2011 for the first time in three years, according to small business group Vistage.

Credit Suisse analyst Gary Balter said in a research note on Wednesday that if Borders ended up closing all of its stores, including about 500 superstores, that would ease pressure on Barnes & Noble.

Balter raised his rating to "neutral" from "underperform" and increased his target price to $16. Barnes & Noble shares were up 2.3 percent at $15.85 in early trading, while Borders gained 3.9 percent to 87 cents.

Barnes & Noble operates 717 namesake superstores and has won between 17 percent and 20 percent of the growing e-book market since the 2009 introduction of its Nook e-reader device.

Borders started its e-bookstore in July, but has not developed its own e-reader. It has only garnered a small share of the e-book market.

Balter said about 70 percent of the chains' stores overlap. Fewer Borders stores would ease pressure on Barnes & Noble, whose retail sales of paper books have fallen as readers migrate to e-books.

Barnes & Noble would take about 18 percent of Borders sales, bringing in an additional $400 million, if the rival chain were to close all of its stores, Balter estimated.

Borders shares fell as low as 83 cents on Tuesday, their lowest price since April 2009, and closed down 74 percent from their 52-week high last April. Sales at Borders superstores open at least a year fell by double-digit percentage rates in 2009 and 2008.

(Reporting by Phil Wahba; Editing by Lisa Von Ahn)

Private employers added 297,000 jobs in December, triple the median estimate by economists and up from the gain of 92,000 in November, an ADP Employer Services report showed on Wednesday.

The news reduced early losses in stock index futures, though the stock market was still expected to open lower. The jobs report helped send the price of the 30-year Treasury bond a full point lower.

"You cannot ignore the strength of this report," Tom Porcelli, a U.S. economist at RBC Capital Markets. "With small business now beginning to start to ramp up hiring, it's safe to feel better about the labor backdrop."

Adding to the rosy picture, the number of planned layoffs at U.S. firms fell last month to the lowest level in 10 years, according to a report by consultants Challenger, Gray & Christmas Inc.

Tempering some of the optimism on Wednesday, an industry group said applications for home mortgages ebbed in the last couple of months of the year, with loan rates hovering around their highest levels in seven months.

The U.S. dollar extended gains against the yen and the euro.

The ADP figures came ahead of the government's much more comprehensive labor market report due on Friday, which will include both public and private sector employment.

That report is expected to show a rise in overall nonfarm payrolls of 140,000 in December, based on a recent Reuters poll of analysts, but a rise in private payrolls of 145,000.

Economists often use the ADP report to fine-tune their forecasts for the payrolls numbers, though it is not always accurate in predicting the outcome.

The ADP report is jointly developed with Macroeconomic Advisers LLC.

(Reporting by Jonathan Spicer)

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 2.3 percent for the week ended December 31 and dipped 3.9 percent in the prior week.

The index has been dragged lower since October by applications to refinance loans, as a spike in interest rates reduced incentives for the homeowners that can qualify under today's tight credit standards. The MBA expects total loan originations will drop to $967 billion this year, down 36 percent from 2010 and less than half that of 2009.

Fixed 30-year mortgage rates jumped to 4.93 percent in the week ending December 24, the highest since May 7, before ending the year at 4.82 percent, the MBA said. The rate is three-quarters of a percentage point higher since early October, as reports of solid consumer spending, and expectations of government and Federal Reserve stimulus plans lifted 2011 outlooks.

Relatively soft application volume follows other recent data points that suggest the U.S. housing market may be on the verge of another downturn. Single-family home prices in October dropped for the fourth straight month, according to the latest Standard & Poor's Case-Shiller index, and analysts are predicting more declines under the weight of foreclosures.

However, housing may draw some demand if recent economic strength gains momentum. The combination of economic recovery and relatively low interest rates has helped boost pending sales of previously-owned homes more than expected in November, the National Association of Realtors said last week.

Broken down, the MBA's seasonally adjusted index of refinancing applications index rose 3.9 percent in the latest week but fell 7.2 percent for the week ended December 24. The index of loans earmarked for home purchases fell 0.8 percent and rose 3.1 percent in those weeks.

(Reporting by Al Yoon; Editing by Diane Craft)

Dogan Yayin is also preparing to sell its flagship Hurriyet daily newspaper separately, another source close to the process told Reuters, adding investment bank Goldman Sachs will invite initial bids by February1.

The starting price for the assets on sale, other than Hurriyet, was expected to be $1.6-$1.8 billion, and U.S. private equity funds KKR and TPG were among the shortlisted bidders, sources said.

A Dogan Yayin official declined to comment on plans for Hurriyet's sale.

Dogan Yayin, embroiled in a legal battle against crippling tax fines, said last month that while it was selling media units, it would not withdraw from the sector entirely.

Hurriyet shares jumped 11 percent to 2.06 lira at 0930 GMT, with Dogan Yayin shares up 3.5 percent to 2.06 lira and parent company Dogan Holding up 1.8 percent at 1.15 lira.

In October, Dogan Holding sold its controlling stake in fuel retailer Petrol Ofisi to Austrian group OMV, its joint venture partner, for 1 billion euros ($1.3 billion).

(Editing by Louise Heavens and Dan Lalor)

($1 = 0.7530 euro)