By Peter McKay
Investors turned the page on a dismal January performance for
stocks Monday, prompted by strong earnings and manufacturing data
to bid the market higher in the new month's first trading
session.
The Dow Jones Industrial Average (DJI) was up 100 points, or 1%,
trading recently at 10,167. The measure was led by a 2.8% gain in
component Exxon Mobil Corp. (XOM) , which posted better quarterly
results than analysts expected.
The S&P 500 (SPX) rose 1.2%, helped by gains in every
sector. Materials and energy were the strongest categories, up 3.3%
and 2.8% respectively, while industrials and technology were up
more than 1%.
The major indicators have posted gains since the opening bell,
with some additional buyers entering the market since the
late-morning release of new data from the Institute for Supply
Management, which said U.S. factory-sector activity booked its best
performance in more than five years in January. Hiring continued to
recover and inflationary pressures quickened.
Monday's rally has erased part of January's 3.5% slide in the
Dow, the biggest monthly decline since February 2009. The recent
pullback coincides with what has generally been a wave of
better-than-expected profit reports, though investors often bet
last month that share prices had factored in the strong earnings
prior to the reporting season.
"People were thinking everything was baked into this market,"
said strategist Joe Williams, of Commerce Trust Co. "But the
mentality is a little different today. People are more open to the
idea that the market might have gotten a little ahead of itself to
the downside, since we were at the bottom of the recent trading
range."
Other economic data on Monday weren't as strong as the ISM
manufacturing data. The Commerce Department said construction
spending fell in December much more than expected, reflecting
commercial real estate weakness. And while personal income rose by
more than expected, climbing 0.4% in December, personal spending
rose by 0.2%, less than economists had predicted.
The reports continue a recent string of hot-and-cold data that
have kept the stock market in check. While most traders and
analysts are confident that the U.S. economy is recovering, there
is increasing worry that it is currently enjoying a one-time bump
as businesses restock their inventories following the recent
financial crisis.
In a worst case, that process would run out before consumers are
ready to step in to fuel the next wave of demand for goods to drive
corporate profits.
"The inventory building isn't a bad thing by any means," said
portfolio manager Bill Stone, of PNC Advisors in Philadelphia. "But
people are going to continue to look for more than just that to
hang their hats on."
Shares of commodity producers were helped Monday by comments
from analysts at Davenport & Co., who touted coal stocks in a
client note, citing upbeat outlooks issued by industry executives
at a conference last week.
The report helped to push Massey Energy (MEE) up 7%. Consol
Energy (CNX) was up 7.2%. .
Metals producers rallied. Alcoa (AA) was up 3.3%. US Steel (X)
gained 6%. Freeport-McMoran Copper & Gold (FCX) rose 6.3%.
The Nasdaq Composite (RIXF) rose 0.8%. Its gains were limited by
a 6% slide in component Amazon.com (AMZN) after the online retailer
conceded defeat in a battle with publisher Macmillan over the price
of e-books.
Oil futures and gold futures climbed while the dollar was lower
against the euro but higher against the yen. Treasurys fell, with
the two-year note off 3/32 to yield 0.867% and the 10-year note
down 19/32 to yield 3.660%.