Stock market kicks off September with strong gains

Updated 7m ago
By Stephen Bernard, AP Business Writer

NEW YORK — Stocks jumped Wednesday after surprisingly strong growth in U.S. and Chinese manufacturing allayed some of the worries that had been building over the global economy in recent weeks.

The new reports snapped a string of disappointing economic data that sent stocks slumping in August. The Standard & Poor's 500 Index, the benchmark most widely used by professional investors, lost 4.7% in August, its worst performance for the month since 2001.

The Dow Jones industrial average jumped 255 points on the first day of September. Broader indexes also rose more than 2.5%. With investors pouring into stocks, Treasury prices fell and interest rates rose.


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The Institute for Supply Management said manufacturing activity in the U.S. rose in August, in contrast to regional reports from recent weeks that pointed to a slowdown in growth. Economists had expected slower growth.

"It gives up hope that things may not be as bad as they seem," said Zahid Siddique, an associate portfolio manager at Gabelli Equity Trust.

Some analysts have said in recent weeks that the slowdown in economic growth could eventually push the country back into recession. Wednesday's manufacturing report, at least temporarily, reduced those fears.

Daniel Penrod, senior industry analyst at the California Credit Union League, said manufacturing reports have become increasingly important because they are a leading indicator for whether companies might start adding new jobs. Investors will be closely watching the Labor Department's monthly report on employment, which is due out on Friday.

"If manufacturers ramp up ... it's going to require hiring," Penrod said. "Getting closer to that threshold (of hiring) is vital to the economy."

The pace of growth in China's manufacturing sector also picked up in August, according to a report, even though economists expected a pullback. Overseas markets also got a lift Wednesday when Australia said its economy grew in the second quarter at the fastest pace in three years.

The Dow rose 254.75, or 2.5%, to 10,269.47. The S&P 500 index rose 30.96, or 2.9%, to 1,080.29, while the Nasdaq composite index rose 62.81, or 2.9%, to 2,176.84.

About six stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.2 billion shares.

The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.60% from 2.47% late Tuesday. That yield helps set interest rates on mortgages and other consumer loans.

While the manufacturing report didn't fall into the recent pattern of showing slowing growth, market reaction to the data fit a pattern seen throughout the summer: Traders' attention spans are short, and they are reacting only to the very latest economic report.

The manufacturing report "gives some comfort, but that is only good until the next number," said Darell Krasnoff, managing director at Bel Air Investment Advisors.

In corporate news, Burger King Holdings Inc. jumped on reports it could be taken private. Shares of the fast food chain jumped $2.36, or 14.41%, to $18.81.

Apple Inc. shares jumped after CEO Steve Jobs announced a new line of iPods. It rose $7.23, or 2.9%, to $250.33.

GE rose 53 cents, or 3.7%, to $15.01. Eaton Corp climbed $5.38, or 7.7%, to $74.86.

Australia's S&P/ASX 200 index jumped 2.1% on the upbeat growth report. Hong Kong's Hang Seng and Japan's Nikkei stock average both climbed on the strong Chinese manufacturing data. Major European markets surged by more than 2% in afternoon trading following the strong economic data in the U.S.

http://www.usatoday.com/money/markets/2 ... sday_N.htm