Stocks Snap Higher Following Encouraging Signs on US Economy
NEW YORK – Stocks roared to their best day in more than a month Tuesday as investors hit the “buy” button following some encouraging signs of strength in the U.S. economy. Construction spending reached its highest level in eight years in January. Banks, the worst-performing sector of the market so far this year, led the way higher.
Stocks jumped at 10 a.m., when the Commerce Department reported that construction spending continued to rise in January. At the same time, a survey showed some signs of life in the beaten-down manufacturing sector. Those were good signs for the U.S. economy.
Banks rose the most, but big names in consumer and tech stocks also climbed, as did oil prices.
The Dow Jones industrial average jumped 348.58 points, or 2.1 percent, to 16,865.08. The Standard & Poor’s 500 index surged 46.12 points, or 2.4 percent, to 1,978.35. That was the biggest gain for the S&P 500, a widely used benchmark, since late January.
The Nasdaq composite index, which is heavily weighted with technology companies, made its biggest gain since August, adding 131.65 points, or 2.9 percent, to 4,689.60.
Stocks have stumbled this year as investors feared for the health of the U.S. economy at the same time that China, Europe, and Japan are slowing or struggling. Tuesday’s report showed construction spending rose by the most in eight months. A manufacturing index had its best reading in six months, though activity is still declining.
Bank of America picked up 67 cents, or 5.4 percent, to $13.19 and JPMorgan Chase gained $2.90, or 5.2 percent, to $59.20, leading financial stocks higher. The S&P 500’s financial component has slumped about 9 percent this year, worse than any other industry, as investors worry about loans banks have made to energy companies and low interest rates.
In recent months the strong dollar has hurt tech stocks, which do a lot of business outside the U.S., because it makes their products more expensive overseas and cuts into their revenue. Those stocks climbed Tuesday, with the biggest gains going to familiar names. Apple gained $3.84, or 4 percent, to $100.53. It had been more than a month since Apple stock closed above $100. Alphabet, the parent of Google, rose $24.95, or 3.5 percent, to $742.17. Microsoft picked up $1.70, or 3.3 percent, to $52.58 and Facebook stock added $2.90, or 2.7 percent, to $109.82.
Karyn Cavanaugh, senior markets strategist for Voya Investment Management, said investors abandoned tech and bank stocks as the market slumped in January and February.
“They’ve just been beaten with a stick this year,” she said. “Earnings have not been that bad and the companies’ financials are not that bad.”
Cavanaugh said investors are pleased with the construction and manufacturing reports, and relieved that the dollar and oil prices seem to have stabilized.
Agribusiness giant Monsanto gained $2.50, or 2.8 percent, to $92.49 and chemical maker DuPont rose $2.07, or 3.4 percent, to $62.94. Among consumer stocks, Amazon rose $26.52, or 4.8 percent, to $579.04 and Netflix gained $4.89, or 5.2 percent, to $98.30.
Most automakers reported big gains in their February U.S. sales. Ford climbed 58 cents, or 4.6 percent, to $13.09 after its sales rose almost 20 percent, a better gain than analysts expected. Honda, Fiat Chrysler and Nissan also reported big improvements. GM’s sales fell as it tries to shift its business away from rental sales, but its stock gained 57 cents, or 1.9 percent, to $30.01.
Auto parts supplier BorgWarner rose $1.48, or 4.6 percent, to $34.16, and navigation device maker Garmin added 93 cents, or 2.3 percent, to $41.44.
Hertz climbed after the company said it cut costs and improved the management of its rental fleet. The stock, which has been trading at its lowest since 2009, jumped $1.04, or 12.2 percent, to $9.54.
Clothing, handbag and accessories maker Kate Spade gained $2.17, or 10.9 percent, to $21.99 after it gave a strong profit forecast for 2016. Human resources software company Workday reported a smaller loss and better-than-expected sales. The stock rose $11.29, or 18.7 percent, to $71.74.
Medical device maker Medtronic gave up $3.21, or 4.1 percent, to $74.18 after its sales fell short of analysts’ projections.
Industrial conglomerate Honeywell said it’s giving up on its effort to buy rival United Technologies. It had offered to buy United Technologies for $108 per share, or about $90 billion, and Honeywell said its target wasn’t willing to negotiate a deal. United Technologies, which was one of the best Dow performers in February, slumped $1.57, or 1.6 percent, to $95.05. Honeywell rebounded $4.52, or 4.5 percent, to $105.87.
Oil prices also moved higher. U.S. crude rose 65 cents, or 1.9 percent, to $34.40 a barrel in New York. Brent crude, the benchmark for international oils, rose 24 cents to $36.81 a barrel in London. Natural gas, which closed at a 17-year low on Monday, climbed 3 cents to $1.74 per 1,000 cubic feet.
Overseas markets rose after China’s move to support bank lending helped offset concern over a drop in manufacturing in the world’s second-largest economy. Germany’s DAX climbed 2.3 percent and France’s CAC-40 added 1.2 percent. Britain’s FTSE 100 rose 0.9 percent. Hong Kong’s Hang Seng gained 1.5 percent. Tokyo’s Nikkei 225 added 0.4 percent.
The euro fell to $1.0868 from $1.0884 late Monday and the dollar rose to 114.05 yen from 112.82 yen.
The price of gold slipped $3.60 to $1,230.80 an ounce and silver decreased 16 cents to $14.76 an ounce. Copper gained 1 cent to $2.15 a pound.
In other energy trading, wholesale gasoline fell 2 cents to $1.31 a gallon. Heating oil rose less than 1 cent to $1.10 a gallon.