Mid-Day Recap: August Opens on Upbeat Note as S&P Touches 1,000
The S&P 500 began August by touching the 1,000 mark for the first time since early November. Led by an unexpected gain in construction spending and a slower decline than expected in the ISM manufacturing index, all three major indexes are climbing midway through the Monday session, building on three weeks of gains.
Just before Noon, the S&P 500 is up 1.14% to 999, while the Dow is trading 0.95% higher at 9,259, and the Nasdaq is climbing 1.00% higher at 1,998. Markets opened higher this morning on optimism that this week’s numbers would confirm trends pointing toward growth in the third quarter, and data released at 10 am didn’t disappoint.
The ISM Manufacturing Index saw its biggest one-month jump since September 2005 as the index came in at 48.9 in July, more than 4 points higher than the June score. Even with four straight improvements, conditions remained in contraction for the 18th consecutive month, but the slowdown is stabilizing as New Orders (55.3) and Production (57.9) each posted major gains.
“It is looking more and more like the U.S. recession will end in Q3,” said BMO economist Jennifer Lee. “We're not saying ‘happy days are here again’ because the recovery will be sporadic. But it is a recovery.”
Released at the same time, Construction Spending unexpectedly climbed 0.3% in June, lifted in large part by the fiscal stimulus package.
“For construction spending, all the signs are there that we've pulled back and that we are on the verge of growing again,” added Jim Awad, managing director at Zephyr Management.
Analysts were expecting construction spending to fall 0.5% in the month, following a drop of 0.8% in May.
Other news of the morning was also positive. More evidence that the government’s $1 billion “Cash for Clunkers” program is working was seen as Ford reported that US auto sales advanced 2.3% last month, the first annual gain since November 2007.
Meanwhile, brewer Molson Coors posted Q2 earnings of $1.01 per share, or $187.3 million in total, compared with just 49 cents a share in Q2 2008, or $91.8 million. Less beer was sold in the quarter, but profits remained in place as the company cut costs and raised prices.
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