With traders reacting positively to the latest U.S. manufacturing data, stocks showed a substantial turnaround over the course of morning trading on Monday. The major averages climbed well off their worst levels of the day and into positive territory.
The major averages gave back some ground going into the close but held on to notable gains. The Dow rose 52.45 points or 0.4 percent to 13,264.49, the Nasdaq advanced 28.13 points or 0.9 percent to 3,119.70 and the S&P 500 climbed 10.43 points or 0.7 percent to 1,418.90.
The turnaround by stocks came on the heels of the release of a report from the Institute for Supply Management showing a slightly bigger than expected increase by its closely watched manufacturing index.
The ISM said its index of activity in the manufacturing sector climbed to 53.4 in March from 52.4 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to edge up to a reading of 53.0.
Paul Dales, Senior U.S. Economist at Capital Economics, said the manufacturing index is consistent with annualized GDP growth of around 2.5 percent.
Meanwhile, traders largely shrugged off the release of a separate report from the Commerce Department showing an unexpected drop in U.S. construction spending in the month of February.
The early weakness on Wall Street was partly due to some disappointing European economic data, with a report from Markit Economics showing a continued contraction in eurozone manufacturing activity.
Markit said its purchasing managers index fell to 47.7 in March from 49.0 in February, with a reading below 50 indicating a contraction. The latest number was in line with a preliminary reading.
A separate report released by Eurostat showed that the unemployment rate in the eurozone rose to a record high of 10.8 percent in February.
Among individual stocks, Avon Products (AVP) surged up by 17.3 percent after the beauty products company said it has rejected an unsolicited takeover offer from Coty Inc. The offer valued Avon at $23.25 per share, a 20 percent premium to its closing price on Friday.
Meanwhile, shares of Groupon (GRPN) tumbled by 16.9 percent after the company announced a downward revision to its fourth quarter results due to an increase to its refund reserve accrual. At the same time, the company reaffirmed its first quarter guidance.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday. Japan's Nikkei 225 Index ended the day up by 0.3 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.
Meanwhile, the major European markets all moved sharply higher over the course of the trading day. The U.K.'s FTSE 100 Index jumped 1.9 percent, the German DAX Index advanced by 1.6 percent, and the French CAC 40 Index rose by 1.1 percent.
In the bond market, treasuries closed modestly higher, well off their best levels of the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.3 basis points to 2.193 percent after hitting a low of 2.162 percent.
Benefiting from the upbeat manufacturing data, steel stocks showed a strong move to the upside on the day. Reflecting the strength in the steel sector, the NYSE Arca Steel Index advanced by 2.2 percent.
Mechel (MTL) and Olympic Steel (ZEUS) turned in two of the steel sector's best performances, climbing by 5.9 percent and 3.7 percent, respectively.
Railroad stocks also saw considerable strength, driving the Dow Jones Railroads Index up by 2.1 percent. CSX Corp. (CSX), Genesee & Wyoming (GWR) and Greenbrier (GBX) all posted notable gains.
Significant strength was also visible among gold stocks, as reflected by the 1.8 percent gain posted by the NYSE Arca Gold Bugs Index. The strength in the gold sector came amid a moderate an increase by the price of the precious metal.
Healthcare provider, natural gas, and computer hardware stocks also saw considerable strength, while weakness remained visible among housing stocks.
Traders are likely to keep a close eye on the release of the minutes of the Federal Reserve's latest meeting on Tuesday, looking for any indications regarding the possibility of further quantitative easing. Ahead of the release of the minutes, trading could be impacted by a report on factory orders.
by RTT Staff Writer
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