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Stocks rally on manufacturing data

 

action. November 1, 2010: 10:37 AM 

NEW YORK (CNNMoney.com) — U.S. stocks started November with a bang. The Dow soared more than 100 points following a better-than-expected report on manufacturing, with the buying spilling over into the broader market.

The Dow Jones industrial average jumped 117 points, or 1.1%, less than an hour into the session. The S&P 500 gained 12 points, or 1%, and the Nasdaq  rose 23 points, or 0.9%.

The Dow is coming off its best October since 2006, although stocks ended mixed on Friday  after government estimates showed the U.S. economy grew at a sluggish 2 in the annual rate in the third quarter.

Stocks have been climbing since late August on expectations of additional stimulus from the Federal Reserve and bets that Tuesday’s Congressional elections will favor the Republicans.

But the tone has been more cautious recently, with stocks mostly moving sideways over the last week, as investors take a wait-and-see attitude ahead of ahead of the week’s big events — the election Tuesday, the Federal Reserve meeting on Wednesday and the October jobs report due Friday.

"All that really matters now is the Fed coming in with a boat-load of money," said Joseph Saluzzi, co-head of equity trading at Themis Trading. "The only reason the market has been going higher for the past two months is because of these expectations of Fed money-pumping."

But a reading showing stronger-than-expected manufacturing growth in October managed to tide investors over on Monday.

Chinese stocks also moved higher overnight on strong manufacturing numbers from the world’s second-biggest economy.

Economy :  The Institute for Supply Management’s manufacturing index jumped to 56.9 in October from 54.4 in September. That easily beat the reading of 54 expected by economists. Any reading above 50 indicates growth in the sector.

A report on personal income and spending before the bell showed that personal income decreased 0.1% while personal spending increased 0.2% in September.

Economists had expected the Commerce Department to report that spending by individuals rose 0.4% in September, according to a consensus estimate from Briefing.com. Personal income was expected to have risen 0.2% in the month.

Separately, government data showed that construction spending unexpectedly rose 0.5% in September, while economists had expected a 0.7% drop.

Companies : AIG (AIG, Fortune 500) announced early Monday that it has raised nearly $37 billion by selling off one insurance subsidiary, and the initial public offering of a second, AIA Group Ltd. AIG’s stock edged up modestly.

Before the bell, Loews (L, Fortune500) reported that its net income dropped in the third quarter to $36 million, compared to $468 million in 2009. That included a one-time charge of $328 million stemming from CNA Financial Corporation, a subsidiary. Excluding that charge, Loews reported earnings of 13 cents per share, topping analyst expectations. Shares were little changed.

Shares of Wilmington Trust (WL) sank more than 5% on news of a bigger-than-expected third quarter loss. The bank also agreed to be bought by M&T (MTB).

World Markets : European shares were higher in midday trading. The CAC 40 in France was up 0.2%, the DAX in Germany rose 0.4% and Britain’s FTSE 100 was up 0.6%.

Asian markets ended mixed. Japan’s benchmark Nikkei index dropped 0.5%, while the Hang Seng in Hong Kong rose 2.4%. The Shanghai Composite ticked up 2.5%.

Currencies and commodities : The dollar rose against the euro and the Japanese yen, but fell against the British pound.

Oil futures for December delivery rallied, gaining $2.31, or 2.5%, to $83.64 a barrel.

Gold for December delivery fell $4.50 to $1353.10 an ounce. Prices on U.S. Treasuries rose Monday, pushing the yield on the benchmark 10-year note down to 2.60% from 2.61% late Friday. 

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