» This Story:Read +|Watch +| Comments

Manufacturing rebound spurs biggest stock rally in months

Network News

X Profile
View More Activity
An indicator of the manufacturing sector's economic health based on new orders, production, employment and other measures.
By Frank Ahrens
Wednesday, September 1, 2010; 8:43 PM

After their worst August in nine years, stocks kicked off September with a big snap-back rally, following the release Wednesday of surprisingly good news about the U.S. manufacturing sector.

This Story
View All Items in This Story
View Only Top Items in This Story

Manufacturing activity jumped unexpectedly in August, according to the Institute for Supply Management, which calculates an index that shows whether U.S. manufacturers are cranking up or gearing down.

The ISM index for August jumped to 56.3, up from 55.5 in July. Forecasters expected the August number to retreat to 53.2, following weeks of disappointing U.S. consumer spending and confidence data. Any number higher than 50 indicates that the economy is growing.

The stock market, which endured a month-long August sell-off and appeared eager for any good news, kicked off a day-long rally in response to the data.

After losing 4.3 percent last month, the Dow Jones Industrial Average rose 2.5 percent Wednesday to close at 10,268.47. All 30 Dow stocks closed up on the day. So far this year, the Dow is down 1.5 percent.

The broader S&P 500 closed up 2.9 percent, at 1,080.29. This puts the S&P 500 just above what is known as the key technical level of 1,080, meaning that if stocks pass up through 1,080, traders expect the rise to continue based on historical performance.

The tech-heavy Nasdaq closed up 2.9 percent, at 2,176.84.

In typical fashion, gold retreated as stocks rose, with the precious metal moving back from its recent highs, closing at $1,246.30 per ounce.

According to the Wednesday ISM data, manufacturers that experienced growth last month included those that make computers, chemicals, clothing, cars and airlines and primary metals, which are used in heavy industry. August manufacturers that lost business included those that make furniture, coal, petroleum products and machinery.

Despite decades of losing manufacturing jobs to cheaper labor overseas, the United States is still the world's largest manufacturing economy.

Manufacturing had increased earlier in the year as businesses, which had let their inventory decline during the recession, began to restock their shelves. But then manufacturing flattened out, until ticking upward again last month.

Not all economic news Wednesday was positive, but the markets didn't seem to care.


CONTINUED     1        >

» This Story:Read +|Watch +| Comments
© 2010 The Washington Post Company

Network News

X My Profile