Recovery hopes get another boost, and markets surge

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The recession-is-ending camp got more supporting news today in the monthly benchmark report on the U.S. manufacturing sector.

Stock prices and commodity prices are running with it: The Standard & Poor’s 500 index is above the 1,000 mark for the first time since early November. The Reuters/Jefferies CRB index of 19 commodities is up 3.6%, also reaching its highest level since early November.

The Institute for Supply Management said its index of manufacturing activity rose to 48.9 in July, up from 44.8 in June and the highest since August 2008.

Although any reading under 50 indicates that activity is contracting, the ISM index has been recovering for seven straight months since bottoming at 32.9 in December.

The ISM ‘is an index with a lot of history,’ said Robert Brusca, head of Fact and Opinion Economics. ‘It is now looking as it does when recessions have ended.’

Significantly, seven of the 10 component indexes within ISM were at 50 or above in July. The index measuring manufacturers’ backlog of orders rose to 50 from 47.5 in June. The new-orders index surged to 55.3 from 49.2. The export-activity index was 50.5, up from 49.5.

Norbert J. Ore, chairman of the ISM’s manufacturing business survey committee, nodded to the hard times many goods producers continue to endure, noting that ‘overall, it would be difficult to convince many manufacturers that we are on the brink of recovery.’

Still, he said, the July report ‘suggests that we will see growth in the third quarter if the trends continue.’

The stock market seems to have no doubts: Share prices are rallying strongly on the first trading day of August, after rocketing in July. The S&P 500 was up 12.93 points, or 1.3%, to 1,000.41 at about 10:30 a.m. PDT. It’s now up 48% since March 9.

The last time the S&P closed above 1,000 was Nov. 4, when it ended at 1,005.75.

Recovery hopes also are fueling bullish bets on commodities today. Prices of raw materials are broadly higher, led by natural gas, grains, copper and cotton.

-- Tom Petruno