Stocks Rise Sharply to Start September
After a decidedly bearish August, the stock market soared on Wednesday as investors responded to favorable news in the manufacturing sector. The Dow Jones industrial average gained 2.2 percent, or 256 points, in early trading. The Nasdaq composite index rallied 3 percent, and the S&P 500 gained 2.9 percent. Stocks gained early in response to a healthy rebound in Chinese manufacturing activity and signs of robust economic growth in Australia. The upward trend was further enhanced later in the day by a report of unexpectedly strong activity in US manufacturing.
Companies in the industrial and materials sector led the rally, as Caterpillar(CAT), United Technologies(UTX), and Boeing(BA) all posted gains between 1 and 3 percent. Oil conglomerates Exxon(XOM) and Chevron(CVX) also posted significant gains as oil prices shot up 3 percent. The rally was rather broad-based, as the New york Stock exchange posted 6 gains for every loss. All 30 of the DOW’s components closed higher.
Analysts said that while the positive manufacturing reports have softened investors’ concerns about the economy, the market remains vulnerable with the cloudy outlook for economic growth moving forward. Investors failed to slow the rally after a weaker-than-expected payroll report from ADP, which is commonly seen as an indicator for the Labor Department’s Friday jobs report. Analysts explain that with the overall uncertainty in the market these days, investors are constantly searching for something to grab on to, and at the moment it appears to be manufacturing.
Stocks usually begin September with a rally before falling off late in the month as a result of end-of-the-quarter movements within mutual funds. The Institute for Supply Management’s index of manufacturing activity climbed to 56.3 in August, in spite of economists’ expectations that the number would drop. Anything over 50 in the index indicates growth within the manufacturing sector.
Meanwhile, ADP’s payroll processing report indicated that US employers cut 10,000 jobs in August, after adding 37,000 jobs in July. Economists had projected growth of 13,000 jobs for the month. A separate report indicated that planned layoffs reached a ten year low in August, at just under 35,000. The number was also a drop of 17 percent from July.
The reports come just ahead of the government’s monthly jobs and unemployment report, due Friday. Economists forecast the government’s report will show 120,000 jobs were lost in August, after 131,000 jobs were lost in July. The unemployment rate is expected to rise slightly from 9.5 percent to 9.6.