FOX Business: The Power to Prosper
Wall Street flipped the calendar to 2011 with bullish enthusiasm on Monday as the Dow soared to fresh two-year highs in the wake of a wave of strong manufacturing reports from around the world.
The Dow Jones Industrial Average rose 93.24 points, or 0.81%, to 11670.75, the Standard & Poor's 500 gained 14.23 points, or 1.13%, to 1271.87 and the Nasdaq Composite added 38.65 points, or 1.46%, to 2691.52. The FOX 50 picked up 11.25 points, or 1.25%, to 908.66.
Wall Street cheered as manufacturing gauges in Europe and Asia hit multi-month highs and a U.S. manufacturing index grew for the 17th straight month, the latest signs the global economic recovery gained momentum in December. Data in China showed that economy is not overheating as much as some had feared.
The latest manufacturing indicators are "not causing people to freak out about some kind of major slowdown. That’s creating a favorable backdrop for money to come into the market to start the year,” said Nick Kalivas, vice president of financial research at MF Global.
Thanks to Monday's rally, the blue chips landed at their highest level since August 2008, the month before the implosion of former investment bank Lehman Brothers. Capped off by its best December since 2003, the Dow climbed 11% in 2010. The Nasdaq Composite leaped 16.9% last year, pushed higher by its best December since 1999.
“I think the uptrend is in place for equities so long as we see the clouds on the horizon remain in the bond market,” NYSE trader Ben Willis from Sunrise Securities told FOX Business. “The money continuing to flow out of the Treasurys and municipals has to find its way into equities and that just means a bull market for us.”
Most of the Dow's 30 stocks gained ground, led by economically-sensitive Alcoa (NYSE:AA), JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC), which relieved shareholders by unveiling a deal to buy back billions of dollars of mortgages. The index's weakest links were Coca-Cola (NYSE:KO) and Intel (NASDAQ:INTC).
The Nasdaq Composite nearly doubled the gains in the broader markets as tech stocks like eBay (NASDAQ:EBAY) and Amazon.com (NASDAQ:AMZN) posted solid gains.
Kalivas said he is interested to see what will happen once the “New Year’s euphoria” wears off because “the market is in a little bit of an overbought state.”
Global markets rallied after a new manufacturing report in China showed activity slid in November from 55.2 to a three-month low of 53.9. The report, which was released on Saturday, also showed manufacturers' input costs climbed at a slower pace, another positive sign.
Ordinarily, traders wouldn't cheer slower economic growth, but the markets have been jittery about signs the economy in China is overheating and inflation would spike, forcing the government to tighten monetary policy.
In Europe, euro area manufacturing activity jumped in December from 55.3 to 47.3 -- the best level since June -- relieving those worried about economic growth on the continent. Germany, the largest economy in Europe, saw its manufacturing activity climb from 58.1 to 60.7 last month
Wall Street maintained its gains after the Institute for Supply Management said manufacturing activity in the U.S. grew from a 56.6 reading in November to 57.0 last month. An above-50 reading indicates expansion. The group said the month capped off a "significant recovery" for much of the U.S. manufacturing sector last year.
Separately, the Commerce Department said U.S. construction spending rose 0.4% in November, doubling expectations from economists and marking the third-straight monthly rise.
Financial stocks led the way higher, jumping just over 2%. Bank of America soared more than 6% after saying it reached a deal with Freddie Mac and Fannie Mae to settle outstanding claims on badly underwritten mortgages its Countrywide unit sold. BofA said it expects to set aside $3 billion in the fourth quarter and post a $2 billion charge as a result of the settlement. The deal removes a big cloud of uncertainty that had been hanging over BofA.
In the commodities complex, crude oil rose 17 cents, or 0.19% a barrel to $91.55 -- its highest settle since October 2008. Gold gained $1.50 a troy ounce, or 0.11%, to a fresh all-time record of $1,422.60.
Goldman Sachs (NYSE:GS) invested $450 million in Facebook that gives the social-networking giant a $50 billion valuation, The New York Times reported. Goldman is expected to raise as much as $1.5 billion from investors for Facebook as part of the deal and is also creating a “special purpose vehicle” to allow its high-net-worth clients to invest in Facebook, the paper reported.
Barnes & Noble (NYSE:BKS) surged 9% after saying its bookstore holiday same-store sales soared 9.7%. The bookseller said December 23 was its largest retail sales day in its nearly 40-year history.
Kraft (NYSE:KFT) is being investigated for possible tax evasion related to its $19 billion takeover of Cadbury last year, the Times reported. Kraft was already being sued for allegedly illegally avoiding tax liabilities related to the sale of shares and capital assets in India.
Clorox (NYSE:CLX) slumped 3% after saying it sees non-GAAP EPS of 57 cents to 63 cents for its fiscal second quarter, compared with the Street’s view of 73 cents. It also said it sees sales sliding 3% to 4% and cut its full-year sales view to a range of flat to up 1%.
Germany's DAX rose 1.09% to 6989.74, France's CAC 40 leaped 2.53% to 3900.86 and the U.K.'s FTSE 100 remained closed.
In Asia, Japan's Nikkei 225 lost 1.12% to 10228.90, Hong Kong's Hang Seng climbed 1.74% to 23436.10 and China's Shanghai Composite jumped 1.76% to 2808.08.