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Stocks rise after strong manufacturing report; Dow on pace for highest close since 2007
NEW YORK (AP) ' The fastest growth in U.S. manufacturing in 10 months gave stocks a lift Tuesday and put the Dow Jones industrial average on track for its highest close in more than four years.
U.S. manufacturing expanded last month at the strongest pace since June, according to the Institute for Supply Management. Orders, hiring and production all rose. A measure of manufacturing employment also reached a nine-month high, a hopeful sign ahead of Friday's monthly jobs report.
The manufacturing news jolted stock indexes out of a morning stupor, and the gains held through the afternoon. The Dow was up 106 points to 13,320 as of 2 p.m. EDT. That put the average on course for its highest close since Dec. 28, 2007.
In a separate report, the Commerce Department said construction spending ticked up in March, following two months of declines.
Sam Stovall, chief equity strategist at S&P Capital IQ, said the two reports looked like evidence that the U.S. economic recovery is on solid footing despite turmoil in Europe and a weak jobs report last month.
"I think investors are encouraged there's at least one place in the world where it's still worth investing," Stovall said. "They're not ready to give up on this bull market yet."
Other indexes pushed higher. The Standard & Poor's 500 index rose 14 points to 1,412, seven points shy of its closing high for the year, set on April 2. The Nasdaq composite climbed 24 points to 3,070.
All 10 industry groups within the S&P 500 were higher, led by energy companies. Chesapeake Energy Corp. jumped 7 percent on reports that the company will replace its chairman, Aubrey McClendon.
McClendon, Chesapeake's founder, was under fire for taking out more than $1 billion in loans using the company's wells as collateral. Chesapeake recently agreed to end the program that allowed McClendon to take personal stakes in the wells. McClendon will stay on as CEO.
Major car companies are reporting monthly auto sales on Tuesday. Industry watchers expect overall sales to rise 2 percent for April compared with a year earlier.
The S&P finished April in the red, its first losing month since November. The Dow managed a tiny gain.
Judging by its track record, May isn't a promising month for stocks. Since World War II, the S&P 500 index has gained an average of 0.31 percent in May. For all months, the average gain is 0.67 percent.
"It's a very undistinguished month," Stovall said.
Among stocks making big moves:
' Sears Holdings Corp. soared 17 percent, the biggest gain in the S&P 500. The operator of Kmart and Sears stores expects to post a first-quarter profit thanks to a gain from the sale of some U.S. and Canadian stores. The company's stock has jumped 99 percent so far this year.
' Archer Daniels Midland Co. gained 6 percent after the food conglomerate reported profits that beat analysts' expectations. Profits dropped by nearly a third over the past year, pulled down by one-time charges and lower weaker results from its ethanol and oilseeds businesses.
' Avon Products Inc. fell 8 percent, the largest drop in the S&P 500. The company said earnings plunged 82 percent, hurt by a bigger restructuring charge, commodity costs and rising labor costs. The results were worse than analysts had expected.