Dow breaks 10,000 barrier as industry in US bounces back
America's most famous stock market index, the Dow Jones Industrial Average, broke back through the psychological 10,000 barrier yesterday after a survey pointed to a rebound in the recession-hit manufacturing sector.
Shares, bond yields and the dollar all rose after a survey of managers showed that activity rose to its highest level for nine months in August. The index produced by the National Association of Purchasing Management recorded its biggest monthly gain for five years.
Analysts had expected another weak number, and the financial markets reacted enthusiastically. By noon, the Dow had jumped almost 170 points, or 1.7 per cent, to 10,118.
The broader S&P 500 index rose 1.3 per cent while the technology-based Nasdaq rose 0.5 per cent. In the UK, the FTSE 100 closed 67.5 points up at the day's high of 5,379.
Meanwhile, the dollar enjoyed its biggest one-day rise against the euro in nine months, jumping 2.5 per cent to 88.5 cents, as hopes of a rebound for the US economy undermined hopes of another cut in interest rates.
The NAPM said its manufacturing index had jumped to 47.9 from 43.6 in July on a scale where a number under 50 indicates contraction. Analysts had forecast 43.9.
The index was boosted by a rise in output – its first for a year – total orders and export orders, which were offset by falls in inventories, jobs and prices.
"We would look for any recovery to be led by new orders," Norbert Ore, chairman of the NAPM's business survey committee, said. "I would consider this cause for optimism that the manufacturing sector has seen its worst."
The latest NAPM figures showed that US manufacturing was still declining, but analysts said the key news was the marked change in direction.
Henry Willmore, the chief economist at Barclays Capital in New York, said: "It's the first indication in a while that the manufacturing sector may be experiencing a turnaround. It calls into doubt that the Federal Reserve is going to ease in October."
Meanwhile, the Federal Reserve Bank of Chicago said the US economy showed signs of improvement in July, adding that its monthly economic gauge suggested the risk of a recession fell last month.
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