Stock Market Surges on Signs of a Stronger Economy
Business + Economy

Stock Market Surges on Signs of a Stronger Economy

Amid new signs that the economy is continuing to improve, investors pushed aside worries about unrest in the Middle East to send stocks to their highest level in two-and-half years. The Dow Jones Industrial Average rose 1.3 percent Tuesday to 12040.16, its biggest gain since last Dec. 1 and the first close above 12000 since June 2008. The broader Standard & Poor’s 500 index jumped 1.7 percent to 1307.59, its first close above 1300 since August 2008 and also its highest close since June 2008.

Corporate earnings for last year’s fourth quarter have come in better than expected. Factories had their best month is nearly seven years in January, according to the Institute of Supply Management’s index of manufacturing activity, beating economist’s expectations and brightening the outlook for job growth. Manufacturers added 136,000 jobs in 2010, the first annual net gain since 1997, the ISM reported, sending the group’s employment index to its highest level since 1973.

Brian Bethune, an economist at IHS Global Insight, told the Associated Press that he expects manufacturers to add about 10,000 to 15,000 jobs a month for the first few months this year. The January jobs report will be released Friday. New orders, export orders and order backlogs all rose in January. "These companies have been running lean and mean,” Bethune said, and are likely to add workers.

Auto makers reported sales gains for January. General Motors said its U.S. sales were up 23 percent from a year ago. Ford sales rose 9 percent. Despite worries about the Middle East, oil prices fell 1.5 percent in New York trading to $90.77 a barrel.

Still, a separate report from the Commerce Department about construction activity indicated that the sector is still struggling. Construction spending fell to $814 billion last year, the lowest level in a decade and nearly half of what some economists consider to be a healthy amount, as home prices continued to fall. Economists expected a small gain.

Strong corporate earnings have been driving stocks higher and the Dow’s 2.7 percent gain last month was its best January in 14 years. Pfizer rose 5.5 percent on Tuesday after reporting its fourth quarter earnings more than tripled from a year earlier.  United Parcel Services, considered a bellwether for the economy because its business reflects consumer spending, said its fourth quarter profit was up 48 percent; its shares rose 4.2 percent. Grain processor Archer Daniels Midland reported a 29 percent gain in its fiscal second-quarter earnings, sending its shares up 6.2 percent.

But the big news will come Friday, when the Labor Department releases its employment report for January and the market will be watching for any change in the 9.4 percent unemployment rate.

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