New York: Wall Street posted its best day in eight weeks on Wednesday as investor mood brightened after better-than-expected factory data from the United States and China.
Investors jumped on stocks across the market, with more than six shares rising for every one that fell on the New York Stock Exchange, while on the Nasdaq, nearly five stocks rose for every one that fell. The broad Russell 3000 index had 21 advancers for each declining stock.
Investors seemed to srug off a A report out on Wed showed that showed private sector employers cut 10,000 jobs in August while economists were expecting employers to add 13,000 jobs during the month, after adding 37,000 in July. Good news came from another report that showed planned job cuts fell to a 10-year low in August, down 17% from July.
Buying mostly came from momentum players and hedge funds, according to Jason Weisberg, director of institutional trading at Seaport Securities in New York. Traders said low volume helped exaggerate gains due to aggressive bidding.
“They’re moving the needle with force, but there’s not a lot of volume behind it. There’s a bunch of people trying to chase returns and this becomes a vicious game,” Weisberg said.
Economically sensitive sectors like industrials and basic materials posted large gains, after the Institute for Supply Management showed US factory activity grew faster than forecast. The ISM report added fuel to a global equities rally driven by strong overnight data out of China and Australia.
Heavy equipment maker Caterpillar Inc, which is sensitive to changes in economic sentiment, rose 4.6% to $68.16. The Dow component said it will invest $180 million over two years to expand manufacturing in Brazil, signaling confidence in emerging markets.
Volume was subdued, but it was above some of the summer’s weakest readings. About 8.12 billion shares changed hands on the New York Stock Exchange, the Nasdaq and the American Stock Exchange, below last year’s estimated daily average of 9.65 billion.
The Dow Jones industrial average rose 254.75 points, or 2.54%, to 10,269.47. The Standard & Poor’s 500 Index added 30.96 points, or 2.95%, to 1,080.29. The Nasdaq Composite Index gained 62.81 points, or 2.97%, to 2,176.84.
The S&P closed above its 14-day moving average for the first time since 10 August, which could set 1,068 as a strong short-term resistance level moving forward.
In the options market, puts outpaced calls in exchange-traded funds that track the S&P 500 index and the Nasdaq, suggesting investors are worried about the day’s sharp rally.
“This is typical of a big strong day like today. When markets go up, people put on hedges as they fear that they might see a pullback tomorrow,” said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.
Puts outpaced calls by a ratio of 1.48 in the S&P 500 ETF, and by 1.23 in the tech-heavy PowerShares QQQ.
Apple Inc shot up 3% to $250.33, matching the Nasdaq’s gain for the day, after it introduced a new version of Apple TV and a new iPod lineup.
The global economic data boosted US oil futures by nearly 3% to settle at $73.91 a barrel and lifted the energy sector. The NYSE Arca Oil stock index rose 4.1% and the PHLX oil services index jumped 4.8%.
Metals prices also advanced on the data, lifting copper to its highest level in more than four months.
Freeport-McMoRan Copper & Gold Inc climbed 5.9% to $76.19 and aluminum producer Alcoa Inc, a Dow component, gained 3% to $10.52.
Shares of Burger King Holdings Inc shot up 14.7% to $18.86. The No. 2 US hamburger chain may put itself up for sale and has already talked with potential buyers, a source said.
In auto news, GM, Ford, and Toyota reported disappointing sales for August, projected as the industry’s worst August in 28 years. Analysts say consumers are avoiding car purchases on fear of a double-dip recession and a bad job market.
Ahead of the key payrolls data on Friday, investors shrugged off a report from ADP Employer Services showing private US companies unexpectedly cut 10,000 jobs in August as well as government data indicating US construction spending fell to its lowest rate in 10 years.