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The new year starts as a happy one for stock investors

It’s been only a few hours, but 2011 is starting as a happy new year for the stock market.

The latest data pointing to an economic recovery -– including encouraging manufacturing news in the U.S. and Europe –- are propelling the major indexes higher this morning.

The Dow Jones industrial average spurted more than 120 points. The Standard & Poor’s 500 is up 1.3%. Small stocks are surging, with the Russell 2000 index rising 2%.

Stocks rallied after a report showed U.S. manufacturing expanding last month at the fastest pace in seven months, matching analyst estimates. The Commerce Department also reported that construction spending rose 0.4% in November, the third straight monthly increase.

The data reinforced the view among investors that the economy is beginning to improve at a solid pace.

The construction sector has been falling since March 2006, but the nascent recovey over the past three months indicates that construction spending “may have turned the corner,” Patrick Newport, an economist at HIS Global Insight, said in a note to clients this morning. He added, however, that “a solid rebound is months away.”

Still, the signs of a strengthening economy were enough to drain money from bonds. The yield on the 10-year Treasury note inched up to 3.33% from 3.29% on Friday.

-- Walter Hamilton

 
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