Stocks Higher on Improving Manufacturing Data (ext: The street)

A better-than-anticipated reading on the Philadelphia Fed index helped stocks lock in a third consecutive day of gains as investors brushed off another unexpected rise in weekly jobless claims.

The Dow Jones Industrial Average climbed 70.89, ro 0.8%, to 9350.05, while the S&P 500 tacked on 10.91 points, or 1.1%, to 1007.37. The Nasdaq Composite edged up 19.98 points, ro 1%, to 1989.22.

Gains accelerated after the Philadelphia Fed reported an unexpected rise in its manufacturing index. The regional index rose to a positive 4.2 in August, improved from negative 7.5 in July, and vs. expectations for negative 2.


"[Data] continues to show that the manufacturing base is contracting less, and even in some cases starting to expand," says Richard Sparks, senior securities analyst at Schaeffer's Investment Research. "It's going to be one of the important factors in pulling us out of this recession and getting GDP growth positive, getting people back to work."

With earnings season winding down, analysts say there are few catalysts on the horizon that could spark a big move in stocks in either direction. At the same time, volume is expected to remain light as traders take summer vacations. Without a clear signal and with fewer participants, trading will likely vary day to day for some time depending on the latest economic news.


"It wasn't as good as people would have liked, but I think you can at least continue to build the story that the claims have stabilized," says Bill Stone, chief investment strategist, PNC Wealth Management. "We all know the employment picture is likely to be one of the later things to get better -- more attention is being paid to what you need to do to get it better."


It's become consensus that we're either out of the recession or going to be this quarter, says Stone. "I think now, what's on investors' minds -- the reason we're seeing more volatility -- is do we see the follow through? Does inventory rebuild in Q3 give way to maybe some gains in employment and the consumer stepping in?"

Investors are wrestling with these questions around the world. China's Shanghai Composite Index rebounded early Tuesday, adding 4.5%, its biggest gain since March, after a 4.3% decline the day prior. Markets around the world followed the index higher.