Stocks are bouncing from oversold levels. A stronger ISM report is offsetting poor construction spending data. A pull back in the U.S. dollar is boosting commodities. Energy stocks are seeing a strong rebound after a terrible January decline. Semiconductors are also showing relative strength with a 2.7% bounce in the SOX index. Crude oil is up 2% to $74.70 a barrel. Gold futures are up 1.9% to $1,105 an ounce.
Asian markets were mixed. The Chinese Shanghai index continues to fall with a 1.6% loss. The Hong Kong Hang Seng index rose 0.6% as it tries to bounce from its simple 200-dma. There were two PMI reports out in China. The official Chinese government purchasing managers index retreated from last month's 20-month high. HSBC also put out a PMI report, which hit an all-time high. Overall the manufacturing picture for China remains robust. In Japan shares of Toyota continue to sink in spite of news that the company has found a solution for their sticky gas pedal problem. The Japanese NIKKEI gained 0.07%.
The European region rallied off their morning lows to close in positive territory. The U.S. ISM data really gave stocks a boost. The French CAC-40 gained 0.6%. The German DAX rose 0.8%. The English FTSE rallied 1.1%.
Here in the U.S. the Institute for Supply Management released their January numbers. Manufacturing rose from 54.9 in December to 58.5 in January. This was the highest level since August 2004 and the sixth monthly gain in a row. Economists were expecting a rise to 55.5. Readings over 50 indicate growth.
In other news the Commerce Department said construction spending plunged to its lowest level in six years. Overall construction spending fell 1.2%. Economists were expecting a 0.5% decline. In a separate report the Commerce Department said consumer spending rose 0.2% in December. This was the third monthly gain in a row. This number got a boost from a one-time Social Security pay out.
Earnings season is still in progress and Dow-component ExxonMobil (XOM) reported earnings of $1.27 a share, which beat Wall Street's estimates by 8 cents. Revenues rose 6.1% to $89.84 billion. Shares of XOM, which has broken support last week are bouncing with a 2.7% gain.
Looking across the major U.S. indices we're seeing a decent bounce but traders should stay cautious. Stocks were very short-term oversold and due for a bounce. The S&P 500 is up 1.2% and trading near prior support in the 1085 region. The NASDAQ composite is up 0.9% and remains under its 100-dma, which as prior support should be new resistance. The Dow Industrials are up 1% near 10,175. The small cap Russell 2000 is up 1.1% with a bounce from the 600 level.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
The market's widespread bounce is having a similar affect on our play list. FDX is probably seeing the biggest move with a 2.7% gain and a rebound toward $80.