Stocks rally on strong manufacturing data

By msnbc.com new services

U.S. stocks had a big January, and they're starting February strong, too.

Stocks climbed Wednesday after strong manufacturing data and encouraging reports about the Greek debt crisis.

Factories raised output in January by the most in seven months, according to the Institute for Supply Management's manufacturing index. And the Commerce Department said construction spending rose 1.5 percent in December, the fifth straight monthly gain.

"This is a market that is hungry for good news, and when it gets it, it responds very positively," said Alan Gayle, senior investment strategist for RidgeWorth Investments.

The Dow was up?79.05 points, or 0.63?percent to 12,711.96. The index was up?151 points earlier in the day. The Standard & Poor's 500 index was up?11.68 points, or?0.89 percent, to 1,324.09. The Nasdaq composite rose?34.40?points,?1.22 percent, to 2,848.24.

All 10 categories in the S&P 500 rose. The biggest gainer was financial stocks, up 2 percent.

On Tuesday, stocks wrapped up their best January in 15 years. The Dow is now up 4.5 percent for 2012. How come?

Investor fears are subsiding. They don't believe a European collapse is imminent, and they're not as worried about the exposure of U.S. financial companies to European debt. Earnings at American companies are generally meeting expectations.

"It doesn't take good news" to make stock prices rise, said Randy Warren, chief investment officer for Warren Financial Service. "It just takes an absence of bad news."

Price-to-earnings ratios for U.S. and European companies had been at low levels that assumed the worst about Europe.

"These are Depression-era valuations, and something has to give," Warren said. That something is rising prices.

Even if there is a shock in Europe, investors increasingly think it won't be catastrophic for U.S. stocks, he said.

There is still plenty that can go wrong. Greece faces a euro14.5 billion bond payment on March 20 that it cannot afford to pay without additional help. Greece and the International Monetary Fund said Wednesday that negotiations for debt deals will conclude within days, raising hopes that it can avoid a default.

Monthly hiring figures from private payroll agency ADP were so-so. ADP said private-sector employment rose by 170,000 from December to January. That was 10,000 fewer jobs than expected by analysts surveyed by FactSet. ADP also said November-to-December job growth was smaller than it previously thought ? 292,000 instead of the initially reported 325,000.

Investors also looked past a cautious outlook from temp employee provider ManowerGroup. Its stock jumped 13 percent after fourth-quarter profits came in much higher than expected. But it said that while hiring may increase this spring, the ongoing European debt crisis could slow job creation. It predicted earnings lower earnings in the current quarter than Wall Street had expected.

In other corporate news:

• Amazon.com Inc. fell 8 percent after its quarterly net income fell and revenue growth was slower than Wall Street had expected.
• Whirlpool rose 18.5 percent after higher appliance prices boosted its quarterly profit, and it said it expects shipments to increase as much as 3 percent in North America this year.
• Health insurer Aetna Inc. rose 3.9 percent after reporting a 73 percent jump in fourth-quarter profit on smaller expenses and low usage of health care.
• Carmarkers reported strong U.S. auto sales for January, with gains at all the big companies except General Motors Co. Privately-held Chrysler's U.S. auto sales surged 44 percent and it reported its first annual profit since 1997.

In Europe, the FTSE 100 index of leading British shares was up 1.9 percent at 5,791 while Germany's DAX rose 2.4 percent to 6,617. The CAC-40 in France was 2.1 percent higher at 3,367.

Earlier in Asia, stock markets lacked the same momentum seen in Europe.

Tokyo's Nikkei 225 edged up less than 0.1 percent to close at 8,809.79 but Hong Kong's Hang Seng ended down 0.3 percent to 20,333.37. Mainland China's main index in Shanghai also fell 1.2 percent to 2,268.08.

The yield on 10-year U.S. Treasury notes rose 0.042 percentage points to 1.845. The euro rose slightly to almost 1.32 against the dollar.

Oil prices fell after reports that U.S. crude supplies rose last week and energy demand remains weak. West Texas Intermediate crude fell 87 cents to end at $97.61 a barrel in New York. Brent crude rose by 58 cents to finish at $111.56 a barrel in London.

Associated Press contributed to this report.

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Source: http://bottomline.msnbc.msn.com/_news/2012/02/01/10291776-stocks-rally-on-strong-manufacturing-data

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