Stocks rise sharply on more signs of recovery
NEW YORK (AP) ó Stocks are starting June with a gain, as upbeat data on overseas manufacturing and U.S. consumer spending added to hopes for a global economic recovery.
The Dow Jones industrial average rose about 140 points, or 1.7 percent, in early trading Monday. The other major indexes also advanced by more than 1 percent.
U.S. investors took their cues from overseas markets, which surged following surveys in Europe and Asia showing that manufacturing is healing. Investors are awaiting a similar survey on U.S. manufacturing later Monday morning, as well as a report on U.S. construction spending.
Meanwhile, the U.S. government reported a smaller-than-expected dip in consumer spending in April. The Commerce Department said consumers trimmed their spending by 0.1 percent, slightly less than the 0.2 percent reduction forecast by economists. Personal incomes was also better than anticipated, coming in flat instead of negative.
Wall Street’s gains came despite General Motors Corp.’s filing for bankruptcy protection.
The highly anticipated move will give the government a 60 percent stake in the ailing automaker. The government is expected to provide GM with an additional $30 billion, on top of $20 billion in government loans GM has already received, to help it restructure. Meanwhile, rival Chrysler LLC, which filed for Chapter 11 protection in April, is expected to emerge from bankruptcy protection this week.
“It’s remarkable the degree of resilience that the equity markets have shown,” said Jack A. Ablin, chief investment officer at Harris Private Bank, referring to the market’s ability to look past the GM bankruptcy and other major market disruptions. “We’ve had plant closings, we’ve had dealer shutdowns. I think the reverberations have already been felt.”
The Dow Jones industrial average said Monday it is dropping GM as a component after the automaker filed for bankruptcy, as well as Citigroup, of which the government now owns a significant stake. GM and Citi will be replaced with Travelers Cos. and Cisco Systems Inc. next week, Dow said.
In early trading, the Dow rose 147.75, or 1.7 percent, to 8,648.08. The Standard & Poor’s 500 index rose 17.83, or 1.9 percent, to 936.97. The Nasdaq composite index rose 35.97, or 2 percent, to 1,810.30.
Overseas, Japan’s Nikkei stock average jumped 1.6 percent, while Hong Kong’s Hang Seng index soared 4.0 percent. In Europe, Britain’s FTSE 100 rose 1.3 percent by afternoon trading, while Germany’s DAX index rose 3.1 percent and France’s CAC-40 gained 2.2 percent.
There also are a handful of technical factors that could affect the market Monday.
The first trading day of the month often brings with it a surge of new money from mutual funds. Also, the S&P broke through its 200-day moving average of 928, which also likely bought on buying.
Stocks have wavered in the past few weeks as investors question the sustainability of the market’s stunning three-month advance. Since March 9, the Dow is up 29.8 percent, the S&P 500 index is up 35.9 percent and the Nasdaq is higher by 39.9 percent. The gains have been fueled in large part by data showing a moderation in the economy’s slide.
On Friday, Wall Street secured the third month of its spring rally with all the major indexes rising at least 1.2 percent on a mix of economic data and soaring commodity prices. Despite the recent gains, the market is still well off its October 2007 peak. The recession has cut into the Dow by 40 percent since then.
Investors are well aware that the stock market tends to turn around before the economy does. But analysts have warned that the market’s surge may have been too big too quick and that some pullback is necessary for a healthy march higher.
New worries have also begun to seep into the market, including a sinking dollar and climbing interest rates. Investors fear such developments could threaten the economy’s recovery.
Government bonds fell again early Monday, pushing yields higher. The yield on the 10-year Treasury note, which is used as a benchmark for home mortgages and other consumer loans, rose to 3.60 percent from 3.46 percent late Friday.
The dollar also weakened further against the euro and the British pound, while commodities like gold and oil extended recent gains.
The Russell 2000 index of smaller companies rose 13.60, or 2.7 percent, to 515.18.