Stocks start month with big gains
Stocks kicked off the new month with a big gain Monday, after strong manufacturing reports around the world and upbeat earnings added to hopes that the global recovery is picking up pace.
The Dow Jones industrial average jumped almost 175 points. Broader indexes also rose nearly 2 percent.
The Institute for Supply Management said its manufacturing index slipped to 55.5 in July from 56.2 a month earlier. Still, the index was strong than the 54.1 economists polled by Thomson Reuters had forecast and any reading above 50 indicates expansion.
The results, while showing a modest slowdown in growth, eased concerns that the economy could ultimately lead to a so-called double-dip recession. Stock trading has been erratic for months because of signs the recovery was weakening and fears that the economy would fall back into recession. However, strong earnings in July helped drive stocks to their best month in a year.
The ISM report is significant because it is the first major reading of the economy from July and investors are trying to determine just how strong the economy will be in the second half of the year.
Industrial and materials stocks, including 3M Co. and General Electric Co., rose on the manufacturing report.
Traders were also encouraged Monday about overseas economies. A manufacturing report for the 16 countries that use the euro was revised higher for July and showed that the continent's economy continues to recover faster than expected.
The stock market's spring plunge was triggered by concerns that rising government debt in Europe would stagnate the region's economy and in turn affect other countries including the U.S.
European markets jumped Monday after big profit reports from banking giants HSBC and BNP Paribas provided more relief that the continent's financial sector is not being hurt by the debt problems.
Asian markets gained after Chinese manufacturing data showed growth at a pace where the government isn't likely to take steps to slow the country's economy. Strong earnings in Japan also helped Monday's global rally.
In morning trading, the Dow Jones industrial average rose 174.08, or 1.7 percent, to 10,639.64. The Standard & Poor's 500 index rose 19.44, or 1.8 percent, to 1,121.04, while the Nasdaq composite index rose 39.17, or 1.7 percent, to 2,293.87.
About 10 stocks rose for every one that fell on the New York Stock Exchange where volume came to 178.7 million shares.
Shares of 3M rose $1.78, or 2.1 percent, to $87.32, while GE rose 31 cents to $16.43. HSBC shares trading in the U.S. rose $2.49, or 4.9 percent, to $53.58.
Monday's ISM manufacturing report was the first of several important economic reports this week. The ISM reports its service sector index on Wednesday. Retailers report July monthly sales on Thursday. And the Labor Department then releases its monthly employment report Friday, which is considered the most important report of the month.
High unemployment remains a major obstacle to a stronger recovery in the U.S. So investors will want to see signs that companies that just reported big earnings for the second quarter are using that money to hire new employees.
With investors jumping back into riskier stocks, bond prices fell Monday. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.96 percent from 2.91 percent late Friday. Its yield is often used as a benchmark to set interest rates on mortgages and other consumer loans.