Stocks rally after surprisingly strong growth in U.S. and Chinese manufacturing

NEW YORK (AP) — 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 percent in the month, its worst performance for the month since 2001.

The Dow Jones industrial average jumped more than 220 points on the first day of September trading. Broader indexes also rose more than 2 percent. With investors pouring into stocks, Treasurys fell and interest rates rose.

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 a decline.

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 new 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.

In morning trading, the Dow rose 222.89, or 2.2 percent, to 10,237.53. The Standard & Poor’s 500 index rose 26.16, or 2.5 percent, to 1,075.49, while the Nasdaq composite index rose 53.86, or 2.6 percent, to 2,167.89.

About 12 stocks rose for every one that fell on the New York Stock Exchange, where volume came to 230.5 million shares.

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

In corporate news, Burger King Holdings Inc. jumped on reports it could be taken private. Shares of the fast food chain jumped $2.52, or 15.3 percent, to $18.98.

Apple Inc. shares jumped ahead of an event later where it is expected to roll out updated iPods. It rose $7.35, or 3 percent, to $250.45.

Australia’s S&P/ASX 200 index jumped 2.1 percent 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 percent in afternoon trading following the strong economic data in the U.S.

Wall St extends gains, indexes up 1 percent

NEW YORK (Reuters) – Stocks extended gains in choppy action on Friday, led higher by materials and energy shares and comments by Federal Reserve Chairman Ben Bernanke that the Fed was ready to take further steps to help the recovery.

* The Dow Jones industrial average (DJI:^DJI – News) rose 120.83 points, or 1.21 percent, to 10,106.64. The Standard & Poor’s 500 Index (^SPX – News) gained 12.34 points, or 1.18 percent, to 1,059.56. The Nasdaq Composite Index (Nasdaq:^IXIC – News) climbed 21.15 points, or 1.00 percent, to 2,139.84.

(Reporting by Leah Schnurr; Editing by Kenneth Barry)

Market Update – 1:30 pm

1:30 pm : Stocks continue to chop along. Losses remain modest in scope.

Meanwhile, Treasuries have started to tick higher. Their modest climb comes as stocks lose luster and results from an auction of 7-year Notes hit newswires. The auction drew a yield of 1.99% and a bid-to-cover of 2.98, which is above recent averages. Indirect bidder participation was 56.7%, which is also above that of recent averages. DJ30 -22.71 NASDAQ -6.32 SP500 -1.67 NASDAQ Adv/Vol/Dec 1194/960 mln/1325 NYSE Adv/Vol/Dec 1640/445 mln/1272

Wall St drops 1 percent after data stirs deflation worry

NEW YORK (Reuters) – U.S. stocks fell on Thursday on anemic economic data that overshadowed solid earnings results from banking bellwether JPMorgan Chase & Co (NYSE:JPM – News).

An unexpected fall in factory activity and a third straight month of decline in producer prices raised concerns about deflation, cooling investors’ enthusiasm about earnings season that had lifted the stock market off its recent lows in early July.

Dow component JPMorgan Chase, which reported earnings during premarket trade, fell 1.5 percent to $39.75, even as second-quarter profit topped estimates and its loan loss reserves dropped by $1.5 billion. Much of the gains came in areas that will not be a stable future source of income.

Jim Awad, managing director at Zephyr Management in New York, said the data confirmed that the recovery is slowing in pace, “adding to fears that post stimulus, the economy is going to ratchet down in terms of its recovery.”

The Dow Jones industrial average (DJI:^DJI – News) fell 101.79 points, or 0.98 percent, to 10,264.93. The Standard & Poor’s 500 Index (^SPX – News) shed 10.85 points, or 0.99 percent, to 1,084.32. The Nasdaq Composite Index (Nasdaq:^IXIC – News) lost 21.51 points, or 0.96 percent, to 2,228.33.

But in the options market, trades on exchange-traded funds that track the S&P 500 Index indicated a short-term bullish sentiment going into options expiration on Friday.

“We continue to see potential pinning of SPX to the 1100 strike,” said Scott Fullman, director of derivative investment strategy at WJB Capital Group.

The S&P Depository Trust (Pacific:SPY – News), down 1 percent at $108.65, was seeing pinning potential between the $107 and $110 strikes, he said.

Pinning is when a stock or index closes at or around its corresponding at-the-money option strike.

At Wednesday’s close, the S&P 500 broke a six-day winning streak while the Dow just eked out a gain and the Nasdaq rose modestly.

In Thursday’s session, bank stocks erased their premarket gains and fell as investors fretted about JPMorgan’s sober assessment of the economy, boding poorly for Citigroup Inc (NYSE:C – News) and Bank of America Corp (NYSE:BAC – News) which report earnings on Friday.

Citi shares were off 3.1 percent at $4.08 and Bank of America fell 3.6 percent to $15.11.

The passage of a broad banking reform bill also looked more likely at midday, with Senate leaders setting a series of final votes on the measure for 2 p.m.

The S&P Financial Index (^GSPF – News) slid 2 percent and contributed the most to the benchmark S&P 500’s decline.

Advanced Micro Devices Inc (NYSE:AMD – News) and Google Inc (NasdaqGS:GOOG – News) will both report quarterly results after the closing bell, giving further insight into the technology sector after Intel Corp (NasdaqGS:INTC – News) posted strong results earlier this week.

AMD slid 2 percent to $7.29, while Google slipped 0.6 percent to $488.62. Inc (NasdaqGS:AMZN – News) fell 2.2 percent to $120.59 after Bank of America-Merrill Lynch downgraded the stock to “neutral” from “buy,” saying the online retailer’s growth was slipping.

On the economic data front, the Philadelphia Federal Reserve Bank said factory activity in the U.S. Mid-Atlantic region fell unexpectedly, while the New York Federal Reserve Bank said New York manufacturing hit the lowest since December 2009.

Before the opening bell, the U.S. Labor Department said the overall U.S. Producer Price Index declined for a third straight month, increasing worries about slumping economic growth. In June, the overall PPI fell 0.5 percent, far more than dip of 0.1 percent expected by economists polled by Reuters.

In one positive economic report, U.S. jobless claims declined to a nearly two-year low in the latest week as seasonal layoffs eased at factories.

(Additional reporting by Edward Krudy; Editing by Jan Paschal)