Sept. 1 (Bloomberg) -- U.S. stocks rose, erasing an early slump, after a report showing unexpected growth in manufacturing industries bolstered optimism in the economy.
The Standard & Poor’s 500 Index climbed 0.7 percent to 1,227.11 at 10:01 a.m. in New York after slumping 0.5 percent. The Dow Jones Industrial Average rose 72.35 points, or 0.6 percent, to 11,685.88.
The Institute for Supply Management’s factory index fell to 50.6 in August from 50.9 the prior month, the Tempe, Arizona- based group said today. A reading of 50 is the dividing line between expansion and contraction in manufacturing.
Economists projected the gauge would drop to 48.5, according to the median forecast in a Bloomberg News survey. Estimates of the 80 economists ranged from 44 to 52. A reading above 42.5 generally indicates an expansion in the overall economy.
U.S. stocks climbed yesterday, capping the S&P 500’s biggest eight-day gain since 2009, after reports showed that U.S. business activity and factory orders expanded at a faster pace than economists had forecast. The gains helped the S&P 500 pare its August decline to 5.7 percent, still the biggest monthly selloff since May 2010.
The S&P 500 plunged 18 percent from an almost three-year high on April 29 through Aug. 8 as concern grew that the world’s largest economy may relapse into a recession and Europe will fail to contain its debt crisis. The retreat was led by companies whose earnings are most-sensitive to the economy, including financial firms, industrial manufacturers and energy and raw-materials producers.
The index rebounded 8.9 percent from Aug. 8 through yesterday after the plunge dragged its valuation to 12.2 times the reported earnings of its companies, the cheapest level since the bull market began in 2009. Gauges of S&P 500 utilities, commodity producers, health-care companies and financials firms rallied more than 10 percent to lead the recovery, according to data compiled by Bloomberg.
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