U.S. Equities Surge By Most Since July on Manufacturing Data

U.S. Session Key Developments

• U.S. Manufacturing Unexpectedly Rises in August For First Time in Four Months
• Crude Oil Posts Largest One-Day Gain Since August 2
• Precious Metals Dip Slightly on Reduced “Safe-Haven” Demand

U.S. stocks posted their largest gain in nearly two months following strong economic reports out of China and a better-than-expected ISM manufacturing reading for the month of August. The Dow Jones Industrial Average rallied 254 points on the day to 10269, while the S&P 500 added 30 points to 1080. U.S. equities followed global stocks higher after China announced its purchasing managers’ index rose from 51.2 to 51.7, beating economist forecasts. The news provided a strong boost to risk sentiment, sending stocks and many commodities higher. Crude oil rallied 2.7 percent, its largest one-day gain since August 2, to $73.91. Furthering the bulls’ case was the U.S. manufacturing release, which showed the industry unexpectedly expanded in August for the first time in four months, rising from 55.5 to 56.3. Readings above the 50 level indicate expansion. The report sent the Dow Jones Industrial Average over 200 points higher on the day, its largest one-day gain since July 7. As for currencies, the risk trade was clearly present, as the Aussie and Kiwi rallied against the U.S. dollar by 2.3 percent and 1.8 percent respectively. The Euro also rallied against its American counterpart, gaining 1 percent to close above the $1.28 level for the first time since August 19.

DJIA 30 / 10269.47 / +254.75 / +2.54%

The Dow Jones Industrial Average rallied for a second straight day as all 30 of the blue-chip stocks closed higher on the session. Bank of America led the financials higher, rallying over 6 percent following an SEC settlement, while Caterpillar shares gained 4.6 percent on the positive manufacturing data. Other strong performers included JPMorgan Chase, General Electric, and Chevron, which each rose at least 3.5 percent on the day.

S&P 500 / 1080.29 / +30.96 / +2.95%

The broad-based S&P 500 gained nearly 3 percent today as industrials, financials, and commodities shares rallied at least 3.5 percent each. Exxon Mobil, the largest company in the S&P oil & gas sector by market cap, gained 2.9 percent on higher energy prices and stronger-than-expected manufacturing data, while copper and gold miner Freeport McMoRan rose nearly 6 percent on bullish data from China. Iron ore supplier Cliffs Natural Resources also contributed to the commodity sector’s gains, rallying 5.6 percent.

NASDAQ / 2176.84 / +62.81 / +2.97%

The tech-heavy Nasdaq posted the largest gain among major U.S. indices, ending a three-day losing skid. Technology shares were especially strong, led by Chinese search giant Baidu which rallied 4.4 percent. Adobe, Cognizant, and Oracle also rallied at least 3.4 percent on the day.

Notable US Event Risk / Economic Releases

Written by James Russell, DailyFX Research

Please send any questions or comments to JRussell@fxcm.com