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Manufacturing Data Contributes To Rally On Wall Street - U.S. Commentary


After ending the previous session narrowly mixed, stocks moved sharply higher over the course of the trading day on Tuesday. The gains on the day lifted the Dow and the S&P 500 to record closing highs, while the Nasdaq reached its best levels since 2000.

The major averages pulled back off their highs for the session in afternoon trading but remained firmly positive. The Dow advanced 129.47 points or 0.8 percent to 16,956.07, the Nasdaq jumped 50.47 points or 1.1 percent to 4,458.65 and the S&P 500 climbed 13.09 points or 0.7 percent to 1,973.32.

Early buying interest was seen on Wall Street due in part to the release of Chinese manufacturing data showing faster growth in the sector.

A report from the China Federation of Logistics and Purchasing and the National Bureau of Statistics showed that their reading on Chinese manufacturing activity climbed to a six-month high of 51.0 in June from 50.8 in May.

Revised estimates released by Markit and HSBC confirmed that Chinese manufacturing activity rebounded in June, with their index rising to 50.7 from 49.4.

Stocks continued to perform well following the release of a separate report from the Institute for Supply Management showing that the U.S. manufacturing sector unexpectedly grew at a slightly slower rate in the month of June.

The ISM said its purchasing managers index edged down to 55.3 in June from 55.4 in May, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to inch up to 55.8.

Despite the modest decrease, Rob Carnell, chief international economist at ING, noted that the index continues to point to robust growth.

"Such a headline manufacturing ISM figure is consistent with GDP growth of 3.5%, and in all likelihood, the U.S. will grow a good deal faster than that in 2Q14 following the execrable 1Q14 GDP result," Carnell said.

Meanwhile, traders largely shrugged off a separate report from the Commerce Department showing that construction spending increased by much less than expected in the month of May.

Sector News

While most of the major sectors moved to the upside on the day, airline stocks posted particularly strong gains. Reflecting the strength in the airline sector, the NYSE Arca Airline Index surged up by 2.4 percent.

Volaris (VLRS) and Delta (DAL) turned in two of the airline sector's best performances, jumping by 5.4 percent and 4.1 percent, respectively.

Biotechnology stocks also showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 2.2 percent. With the gain, the index reached its best closing level in well over three months.

Significant strength was also visible among computer hardware stocks, as reflected by the 1.9 percent gain posted by the NYSE Arca Computer Hardware Index. The gain lifted the index to a new record closing high.

Internet, semiconductor, and healthcare stocks also saw notable strength on the day, while gold and utilities stocks bucked the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. Japan's Nikkei 225 Index surged up by 1.1 percent, while Australia's All Ordinaries Index fell by 0.3 percent. The markets in Hong Kong were closed for a holiday.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the German DAX Index rose by 0.7 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both advanced by 0.9 percent.

In the bond market, treasuries gave back some ground after trending higher over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.7 basis points to 2.563 percent.

Looking Ahead

Reports on private sector employment and factory orders may attract some attention on Wednesday along with remarks by Federal Reserve Chair Janet Yellen.

Nonetheless, activity may be somewhat subdued as traders look ahead to the release of the Labor Department's closely watched monthly jobs report on Thursday.

by RTTNews Staff Writer

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