Bulls on Loose in New Year
NEW YORK (TheStreet) -- Stocks posted strong gains of roughly 1% during 2011's first trading session as promising manufacturing and construction data bolstered confidence in the U.S. economy's recovery prospects.
The bullish action in equities was a strong sign the January Effect is poised to be a factor this year, despite double-digit percentage gains for all three major U.S. equity indices in 2010.
The Dow Jones Industrial Average rose 93 points, or 0.8%, to close at 11,671. The S&P 500 added 14 points, or 1.1%, to finish at 1,272, and the Nasdaq Composite closed higher by 39 points, or 1.5%, at 2,692.
Financial stocks led Monday's broad rally with Bank of America (BAC) and JPMorgan Chase (JPM) topping the Dow alongside Alcoa (AA). Exxon Mobil (XOM) was also a standout, finishing the session up by 2%. Intel (INTC), Coca-Cola (KO), McDonald's (MCD) and General Electric (GE) were the only Dow components to close in negative territory. Trading volume strengthened from levels seen in 2010's final sessions with 1.1 billion stocks trading on the New York Stock Exchange and 1.9 billion shares changing hands on the Nasdaq. Breadth was clearly weighted to the positive with 72% of stocks posting gains and 25% losing ground. The strong start to the new year was fueled by two encouraging economic reports. The Institute for Supply Management said Monday morning that manufacturing activity continued to trend up in December. The purchasing managers' index rose to 57%, up from 56.6% in November. Economists had forecast the ISM Manufacturing Index to rise to 57.3, according to consensus estimates from Briefing.com. The Commerce Department also reported a 0.4% rise in construction spending for November. Spending was expected to rise 0.2% after ticking up 0.7% in October, according to Briefing.com. "The market has been rising in anticipation of all this good news," said John Canally, economist of LPL Financial. "In order to stay here, we need to build on that. ...We need to see job growth at 200,000 to 300,000 in the next few months and jobless claims below 400,000 for the next several weeks. Otherwise, the markets will conclude that 'yes, there is manufacturing growth but it is not translating to jobs,' " he said. Canally expects the positive momentum to continue in the near term in light of the recent burst of positive economic data. Still, he does not rule out bad news after a tumultuous 2010. "Most of the landmines for 2011 we have not even thought about yet."
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