From Fred Imbert: Stocks jumped on Monday as strong manufacturing data out of the U.S. and China eased worries of a possible global economic slowdown.
The Dow Jones Industrial Average rose 254 points –breaking above 26,000 — led by gains in United Technologies and Caterpillar. The S&P 500 climbed 0.8 percent as the financials sector outperformed. The Nasdaq Composite traded 0.9 percent higher on gains from Facebook, Amazon, Netflix and Alphabet.
Bank stocks rose broadly. Citigroup, Goldman Sachs, Morgan Stanley, Bank of America and J.P. Morgan Chase all traded at least 2 percent higher. The SPDR S&P Bank ETF (KBE) jumped 1.7 percent.
U.S. manufacturing activity expanded last month, rebounding from its lowest level since late 2016, according to data from the Institute for Supply Management. The Dow and S&P 500 jumped to their highs of the day on the data.
The Caixin/Markit Manufacturing Purchasing Managers’ Index jumped to 50.8 in March — its highest level in eight months — after economists polled by Refinitiv expected a print of 49.9. A number above 50 indicates expansion; a number below 50 shows contraction.
Asian equities rose broadly on the data, with the Shanghai Composite surging 2.6 percent. Japan’s Nikkei 225 and South Korea’s Kospi indexes both rose more than 1 percent overnight. European stocks also climbed. The Stoxx 600 index traded 1.2 percent higher.
The figures gave some much-needed relief to investors unnerved of late by fears of a global economic downturn. Early last week, equities came under pressure as bond markets indicated an impending U.S. recession.
The yield on the 10-year Treasury note recently dipped below that of the 3-month bill, in what’s known as a yield curve inversion. A yield curve inversion is seen as a trusted predictor of a recession.
“The cycle is extended, and the inverted curve has made us even more alert for trouble in the economy and financial markets, but we do not think trouble is imminent,” Doug Peta, chief U.S. investment strategist at BCA Research, said in a note. “We are not dismissing the inverted yield curve, but our other recession-indicator inputs are not confirming its warning. Given the Fed’s new guidance, we expect that the next recession will not arrive before mid-to-late 2020.”
Monday’s gains came after the S&P 500 notched last week its best start to a year since 1998 and its strongest quarterly performance since 2009. The broad index gained 13.1 percent in the first quarter, led by the technology sector.
In other news boosting markets, the U.S. and China recently concluded their latest round of trade talks. U.S. officials last week said China had made proposals on a number of issues — including forced technology transfers — that go further than previous commitments.
The two superpowers are set to resume talks in Washington this week. Both countries have targeted billions of dollars’ worth of each other’s goods with tariffs in their protracted trade dispute.
–CNBC’s Ryan Browne contributed to this report.
The SPDR Dow Jones Industrial Average ETF (DIA) was trading at $261.73 per share on Monday morning, up $2.60 (+1.00%). Year-to-date, DIA has gained 6.68%, versus a 7.30% rise in the benchmark S&P 500 index during the same period.
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