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Stocks start month with big gains | The Mesh Report

Stocks start month with big gains

the Mesh Report Staff August 2, 2010 0
By Stephen Bernard, AP Business Writer

NEW YORK — Stocks kicked off the new month with a big gain Monday, after strong economic and earnings reports overseas added to hopes that the global recovery is picking up pace.

In the U.S., though, signs continue to point to a slowdown in growth. Investors will closely watch a key reading on the manufacturing sector from the Institute for Supply Management, due out shortly after the market opens. The ISM report is the first major economic report from July and will be closely read to see if the recent trend of slowing growth continues. The second-quarter gross domestic product reading released Friday was the latest report to show diminishing growth.

Stock trading has been erratic for months because of signs the recovery was weakening and fears that the economy would fall back into recession. But strong earnings in July helped drive stocks to their best month in a year.

The ISM’s manufacturing index likely fell to 54.1 in July from 56.2 in June, according to economists polled by Thomson Reuters. Any number above 50 indicates manufacturing is growing, so even with a slowdown, manufacturing keeps expanding. That should help reduce fears about a so-called double-dip recession.

Traders were particularly encouraged Monday about economic strength overseas. A similar manufacturing report for the 16 countries that use the euro was revised higher for July, showing the continent’s economy continues to recover faster than expected.

The stock market’s spring plunge was triggered by concerns that rising government debt in Europe would stagnate the region’s economy and in turn affect other countries including the U.S.

European markets jumped Monday after big profit reports from banking giants HSBC and BNP Paribas provided more relief that the continent’s financial sector is not being hurt by the debt problems.

Asian markets gained after Chinese manufacturing data showed growth at a pace where the government isn’t likely to take steps to slow the country’s economy. Strong earnings in Japan also helped Monday’s global rally.

In early morning trading, the Dow Jones industrial average rose 125.87, or 1.2%, to 10,591.81. The Standard & Poor’s 500 index rose 13.85, or 1.3%, to 1,115.45, while the Nasdaq composite index rose 23.86, or 1.1%, to 2,278.56.



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