Stocks soar on manufacturing report

Durable goods orders fall slightly less than expected. August new-home sales were flat. Gold hits $1,300 an ounce. FTC approves BHP Billiton's hostile bid for Potash.

By TheStreet Staff Sep 24, 2010 7:55AM

TheStreetBy Melinda Peer, TheStreet


Updated at 1:20 p.m. ET


Stocks were climbing after durable goods orders fell less than expected, boosting optimism on Wall Street.


At 1:20 p.m. ET, the Dow Jones Industrial Average ($INDU) was up by 185 points, or 1.7%, at 10,847. The S&P 500 ($INX) was up by 22 points, or 2%, at 1,147. The Nasdaq ($COMPX) was rising by 46 points, or 2%, to 2,374.


The Commerce Department said durable goods orders declined 1.3% in August after rising 0.7% in the previous month. The decline was slightly less than the 1.4% drop anticipated by economists, according to Excluding transportation, orders grew 2% after slumping 3.7% in July. Analysts were expecting a 0.5% increase.


Ralph Fogel, head of investment strategy at Fogel Neale Partners, sees a combination of technical and fundamental reasons behind why the market is paying more attention to the good news than bad news.


”All it took was some good news today -- with durable goods orders that were a little bit of a surprise -- for the market to take off," Fogel said. "So the technical underpinnings are there.”


”On a fundamental basis,” he added, “people are starting to wake up to the fact that they can get 2% and change from 10-year Treasury bonds or they can buy Johnson & Johnson (JNJ) and get a 3.5% yield with the potential for upside.”


Conglomerates and capital goods sectors were leading the session’s gains with Hewlett-Packard (HPQ), Alcoa (AA) and Boeing (BA) putting in the best performance on the Dow.


The better-than-expected order report helped counter weak data on the housing market. The Commerce Department said new-home sales were unchanged in August from the previous month at an annualized rate of 288,000. Economists had expected sales to increase by 15,000.

In company news, BHP Billiton (BHP) got approval from the U.S. Federal Trade Commission to go ahead with its attempt to takeover Potash Corp. of Saskatchewan (POT). The FTC green light comes just two days after Potash sued BHP in U.S. federal court in an effort to block their bid. Potash shares were gaining 0.5%, to $146.04 and BHP’s stock was rising 2.2% to $75.71.


Shares of Netflix (NFLX) were jumping 3.1% to $165.45 on news that it will expand its licensing agreement with NBC to allow users to stream prior TV series from its cable and broadcast networks.


NBC Universal CEO Jeff Zucker plans to leave his position after Comcast (CMCSA) completes its takeover of NBC. Shares of NBC parent company General Electric (GE) were trading 1.8% higher at $16.43 while Comcast’s stock was advancing 3.1% to $18.48.


Shares of American Axle & Manufacturing (AXL) surged 3.1% to $9.12 following its announcement of a joint venture with Saab Automobile to deliver vehicle fuel efficiency components.


Novartis (NVS) signed an agreement to sell the U.S. rights to Enablex, a treatment for symptoms of an overactive bladder, to Warner Chilcott (WCRX) for $400 million. Novartis shares were rising 1.7% to $57.29, while Warner Chilcott shares were up 1.5% to $22.80.


HSBC (HBC) CEO Michael Geoghegan will step down at the end of the year and will be replaced by Stuart Gulliver, the head of the group's investment bank. HSBC's American depositary receipts were climbing 1.6% to $52.57.


Walt Disney's (DIS) top Internet executive, Steve Wadsworth, announced his resignation. His successor has yet to be named. Disney shares were advancing 1.3% to $33.54.


In commodity markets, crude oil for November delivery was gaining $1.07 at $76.29 a barrel.


The December gold contract, the most actively traded gold future, was up by $1.80 to $1,298.10 an ounce. Gold prices earlier topped a record $1,300.


The dollar was trading lower against a basket of currencies, with the dollar index down by 0.8%, while the benchmark 10-year Treasury note weakened 13/32, lifting the yield to 2.598%.


Hong Kong's Hang Seng gained 0.3%, while Japan's Nikkei shed 1%. The FTSE in London rose 0.9% and the DAX in Frankfurt climbed 1.8%.


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