Stocks continue weeklong rally as manufacturing rebounds; S&P on track for best week in a year
On Friday July 1, 2011, 12:34 pm EDTNEW YORK (AP) -- A rebound in manufacturing prolonged a weeklong rally in the stock market Friday. Major indexes are track for their best week in a year. ,
The increase in the Institute for Supply Management's manufacturing index in June came after the closely watched measure had its sharpest one-month drop since 1984 in May. Stock indexes started the day mixed but jumped in midmorning trading after the report came out.
The Dow Jones industrial average rose 120 points, or 1 percent, to 12,535 in afternoon trading. The Standard & Poor's 500 index added 11, or 0.9 percent, to 1,332. The Nasdaq composite rose 29, or 1 percent, to 2,802.
The gain in U.S. manufacturing surprised investors, many of whom had lowered their estimates for growth over the last two months as it appeared that the economic recovery was slowing down. The slow patch was blamed on a shortage of computer chips and auto parts from Japan, higher gas prices and severe weather in the South.
The ISM report reinforced the growing perception that the slowdown was temporary. Federal Reserve Chairman Ben Bernanke and prominent economists have argued that the economy would pick up again once the effects of the Japan disaster and high gas prices receded.
"We're seeing an unwinding of the tremendous negativity that built up over the past few weeks," said Todd Salamone, an investment strategist at Schaffer's Investment Research.
Every one of the 30 stocks in the Dow average rose except for Pfizer Inc. Companies that do well during times of economic expansion rose the most. Aluminum maker Alcoa Inc. and Caterpillar Inc. each rose more than 2 percent.
Stock indexes are on track for their best week since July of last year. The Dow Jones industrial average has gained 600 points, or 5 percent, so far this week.
The for-profit education company Apollo Group rose 7.5 percent despite a steep drop in students after beating analyst's profit estimates. Darden Restaurants, the parent company of Red Lobster and the Olive Garden, rose 4 percent after reporting that sales rose at all of its divisions. And Eastman Kodak lost 10 percent after a judge threw out some of its claims in a trade dispute with Apple Inc. and Research in Motion Ltd.
Stocks began a weeklong rally Monday after Nike Inc. reported surprisingly strong quarterly results. That led investors to believe that shoppers are continuing to splurge on sneakers and sportswear despite the recent run-up in gas prices. The Dow added more than 150 points Thursday after Greece cleared its final hurdle before it receives its next round of loans. A separate report found that manufacturing in the Chicago region picked up unexpectedly.
The Dow eked out a small gain for the quarter that ended Thursday. The S&P 500 and Nasdaq each fell less than 0.4 percent.
No major corporate earnings reports are expected Friday. The next major round of earnings announcements begins July 11 when Alcoa Inc. releases its results.