Stocks Rally on Strong Economic Data
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A round of upbeat data on major economies across the world launched Wall Street into the green in its first trading session of 2012.
As of 2:50 p.m. ET, the Dow Jones Industrial Average rallied 222 points, or 1.8%, to 12440, the S&P 500 jumped 23.3 points, or 1.9%, to 1281 and the Nasdaq Composite gained 50.1 points, or 1.9%, to 2655.
Market participants cited a slew of economic data for the upbeat tone on Tuesday.
The rally was broad, with all but three of the 30 Dow components trading higher. Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM) Caterpillar (NYSE:CAT) and Alcoa (NYSE:AA) led the charge, posting substantial gains. BofA, the second-biggest U.S. bank by assets, was the worst-performing blue chip last year, crumbling more than 50%.
Eight blue chips hi multi-year highs on the day, according to data compiled by FOX Business. Among them, McDonald's (NYSE:MCD) notched an all-time high before falling back, while Kraft Foods (NYSE:KFT) was trading at the highest level in eight years.
The top Dow components were also an indication of broader trends on the day: Financials, industrials and basic materials shares were some of the best performers on the S&P 500. Utilities were a notable exception, with the sector falling.
Also in corporate news, 3M (NYSE:MMM) unveiled plans to scoop up Avery Dennison's (NYSE:AVY) office and consumer products business for $550 million in cash. Both companies saw big gains in their stock prices on the news.
Volatility was down 2.7%, as tracked by the CBOE's VIX. Meanwhile, Treasury yields climbed as traders dropped the safe-haven asset. The benchmark 10-year note yields 1.953% from 1.874%.
The Institute for Supply Management said the U.S. manufacturing sector expanded at a swifter pace in December from November. The ISM PMI gauge rose to 53.9 in December from 52.7 in November, topping estimates of 53.2. A separate report from the Commerce Department showed construction spending jumping 1.2% in November from the month prior, zipping past estimates of a 0.5% gain. Spending is now at its highest level since June 2010 as that sector is rebounding from the recession.
Other global reports were positive as well. A gauge of Chinese manufacturing activity showed the world's second-biggest economy began expanding in December after contracting the prior month. The country's official purchasing managers index hit 50.3 from the month from 49 in November.
Germany, Europe's economic powerhouse, saw its unemployment rate fall 0.1 percentage point to 6.8%, striking a new record low unified Germany, according to Reuters. Manufacturing reports from Australia and India were also seen as strong, traders said.
Also on the economic front, Federal Reserve officials will begin publishing interest rate forecasts later this month as the central bank looks to make its communications strategy more transparent, minutes released on Tuesday reveal. The market had nearly no reaction after the minutes were released.
"There isn’t too much surprising in the minutes," Dan Greenhaus, chief global strategist at BTIG said in a report.
U.S. markets were closed on Monday, as were many world markets. However, Germany's DAX rallied 3% on the day, and the broad Euro Stoxx 600 jumped more than 1%.
The euro jumped 0.9% to $1.305, while the U.S. dollar declined 0.63% against a basket of six world currencies.
Energy futures were strongly to the upside, getting a boost from worries that mounting tension between the United States and Iran may ultimately lead to a supply shock and hopes that strong economic data may boost demand.
The benchmark crude oil contract traded in New York jumped $4.13, or 4.2%, to $102.96 a barrel. Wholesale RBOB gasoline gained 9 cents, or 3.4%, to $2.749 a barrel.
In metals, gold jumped $33.70, or 2.2%, to $1,601 a troy ounce. Silver was up $1.66, or 5.6%, to $29.53 a troy ounce.
Verizon Communications (NYSE:VZ) was cut to "buy" from "conviction buy" at influential investment bank Goldman Sachs.
TOTAL (NYSE:TOT) acquired a chunk of Chesapeake Energy's (NYSE:CHK) Ohio shale operation for $2.32 billion.
European blue chips rose 0.83%, the English FTSE 100 jumped 2.3% to 5,700 and the German DAX gained 1.5% to 6,167.
In Asia, the Japanese Nikkei 225 rose 0.67% to 8,455 and the Chinese Hang Seng soared 2.4% to 18,877.