Stocks saw substantial gains on Tuesday, with the strongest U.S. manufacturing activity number since 2004 prompting buying interest whilst helping to put uncertainty from civil unrest in Egypt on the backburner. Notably, the Dow finished at its best level since June of 2008, closing above the 12,000 mark.
The major averages moved sideways late in the session, holding on to strong gains. The Dow surged up by 148.23 points or 1.2 percent to close at 12,040.16, the Nasdaq jumped 51.11 points or 1.9 percent to 2,751.19 and the S&P 500 rose by 21.47 points or 1.7 percent to 1,307.59.
Data from the Institute for Supply Management helped to drive the rally today, with the report showing that the index of activity in the manufacturing sector rose to 60.8 in January from a revised 58.5 in December. A reading above 50 indicates growth in the sector.
With the notable increase in January, the manufacturing index reached its highest level since coming in at 61.4 in May of 2004. The January reading also pointed to the eighteenth consecutive month of expansion in the sector.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The headline index is now at a level consistent with GDP growth of roughly 5 percent annualized."
"This is obviously very encouraging, but actual growth is likely to come in weaker than that since other sectors are not faring half as well in this recovery as manufacturing appears to be," he added.
Meanwhile, the Commerce Department reported that construction spending fell 2.5 percent to $787.9 billion in December from the revised November estimate of $807.8 billion. The steep drop came as a surprise to economists, who had expected spending to edge up by 0.2 percent.
Traders largely shrugged off the disappointing construction data, as the steep drop was due in part to poor weather conditions across large sections of the country, including severe snow storms in the Northeast.
In earnings news, United Parcel Service (UPS) posted adjusted fourth-quarter net income of $1.08 per share, exceeding expectations for $1.05 per share. Total revenue came in at $13.42 billion, edging past estimates for $13.40 billion.
The company's full year 2011 earnings guidance also exceeded current Wall Street estimates. UPS gained 4.1 percent on the news.
Sector News
Technology stocks led the day's rally, with computer hardware and semiconductor stocks posting particularly strong gains.
Within the hardware sector, Lexmark (LXK) closed sharply higher after its fourth quarter earnings and revenues topped estimates and the firm offered satisfactory first quarter guidance. Shares of Lexmark soared by 13.2 percent to their best closing price in three months.
Imation (IMN) also turned in a strong performance after reporting its fourth quarter results and unveiling its corporate strategy. The stock advanced by 15 percent to its highest closing price in nine months.
Steel, banking, gold and housing stocks also moved markedly higher, reflecting the day's broad-based buying interest. Additional strength was visible among health insurance, software, internet and transportation stocks.
Dow Components
Pfizer (PFE) led the way higher in the Dow with a gain of 5.5 percent. The advance lifted the stock to a one-year closing high.
The move came after the firm posted adjusted fourth-quarter income of $0.47 per share, down year-over-year but above analyst estimates for $0.46 per share. Revenues for the quarter totaled $17.56 billion, topping expectations for $16.97 billion for the quarter.
Pfizer forecast full year 2011 adjusted earnings of $2.16 to $2.26 per share on revenues of $66 billion to $68 billion. Analysts had expected earnings of $2.30 per share on revenues of $66.8 billion.
Aluminum producer Alcoa (AA) also closed notably higher, rising by 4.5 percent. Shares also rose to their best closing price in a year's time.
Bank of America (BAC), Exxon Mobil (XOM), General Electric (GE) and Disney (DIS) also advanced by substantial margins, rounding out the best blue chip performers on the day.
On the downside, McDonald's (MCD), Procter & Gamble (PG) and 3M (MMM) were the only Dow components that closed in the red, seeing losses of less than a half of a percent each.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region saw modest gains on Tuesday. Japan's benchmark Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index gained 0.2 percent.
Meanwhile, the major European markets saw more notable gains. The U.K.'s FTSE 100 Index and the French CAC 40 Index rose by 1.6 percent and 1.7 percent, respectively, while the German DAX Index advanced by 1.5 percent.
In the bond markets, treasuries ended moderately lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed at 3.443 percent, rising by 6.5 basis points.
Looking Ahead
Wednesday, data on private sector employment is likely to be in focus, while earnings from Mattel (MAT), Electronic Arts (ERTS) and Aflac (AFL) are also likely to attract attention.
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