Stocks rebound on energy, manufacturing strength

NEW YORK —
Investors turned the page on a dismal January performance for stocks
Monday, prompted by strong earnings and manufacturing data to bid the
market to its best one-day gain since the year’s first trading session.

The Dow Jones Industrial Average ended 118.20 points
higher, up 1.2 percent to 10,185.53. The gains represented the Dow’s
biggest rise in point and percentage terms since a 156-point gain on Jan. 4.

The Dow and other market yardsticks opened with
gains and marched steadily higher through most of the session,
finishing near their session highs.

Some additional buyers entered the market following the late-morning release of new data from the Institute for Supply Management,
which said U.S. factory-sector activity booked its best performance in
more than five years in January. Hiring continued to recover, and
inflationary pressures quickened.

Monday’s rally erased part of January’s 3.5 percent slide in the Dow, the biggest monthly decline since February 2009.
The recent pullback coincides with what has generally been a wave of
better-than-expected profit reports, though investors often bet last
month that share prices had factored in the strong earnings.

“People were thinking everything was baked into this market,” said strategist Joe Williams, of Commerce Trust Co.
“But the mentality is a little different today. People are more open to
the idea that the market might have gotten a little ahead of itself to
the downside, since we were at the bottom of the recent trading range.”

The Dow was led Monday by a 2.7 percent gain in component Exxon Mobil Corp., which posted better quarterly results than analysts expected.

The S&P 500 enjoyed an across-the-board rally in
all its sectors, pushing the index to an overall gain of 1.4 percent.
The basic-materials category was the strongest, up 3.7 percent. Energy
rose 3 percent, while financials, technology, industrials, and the
consumer-discretionary sector were up more than 1 percent each.

Other economic data on Monday weren’t as strong as the ISM manufacturing data. The Commerce Department said construction spending fell in December much more than expected, reflecting commercial real estate weakness.

And while personal income rose by more than
expected, climbing 0.4 percent in December, personal spending rose by
0.2 percent, less than economists had predicted.

The reports continue a recent string of hot-and-cold
data that have kept the stock market in check. While most traders and
analysts are confident that the U.S. economy is recovering, there is
increasing worry that it is currently enjoying a one-time bump as
businesses restock their inventories following the recent financial
crisis.

In a worst case, that process would run out before
consumers are ready to step in to fuel the next wave of demand for
goods to drive corporate profits.

“The inventory building isn’t a bad thing by any means,” said portfolio manager Bill Stone, of PNC Advisors in Philadelphia. “But people are going to continue to look for more than just that to hang their hats on.”

Shares of commodity producers were helped Monday by comments from analysts at Davenport & Co.,
who touted coal stocks in a client note, citing upbeat outlooks issued
by industry executives at a conference last week. The report helped to
push Massey Energy up 7.9 percent. Consol Energy was up 7.2 percent.

Metals producers rallied. Alcoa was up 5 percent. US Steel gained 6.5 percent. Freeport-McMoran Copper & Gold rose 7.4 percent.

The Nasdaq Composite rose 1.1 percent. Its gains were limited by a 5.2 percent slide in component Amazon.com after the online retailer conceded defeat in a battle with publisher Macmillan over the price of e-books.

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