Stock Market News for September 2, 2010

U.S. stocks started September on a high note as better-than-expected manufacturing data bolstered hopes that the economy is gaining strength, albeit slowly. All major stock indexes notched up gains of at least 2.5%, retracing some of the losses from August’s hammering. September is known for volatile swings in the market.

Yesterday, investors swung into action after reports from China suggested strength in economic activity in that country. The rally intensified after the Institute of Supply Management reported a surprise rise in U.S. manufacturing activity. As investors turned to equities, treasury prices dropped, sending corresponding yields higher. Gold and the dollar fell in price.

Australia’s GDP also had some bearing on investors’ minds yesterday. Reports showed the country’s economy grew 1.2% in the second-quarter, up from estimates of 0.9%.

The Dow industrials had their best day since July 7, as the index vaulted 255 points. All 30 components marked gains on the day. Industrial stocks led the index higher, with Caterpillar and General Electric leading the charge. The S&P 500 and the tech-heavy Nasdaq composite index each surged nearly 3%.

On the New York Stock Exchange, about six stocks rose in price for every one that fell. The risk-on sentiment sent yields on 10-year Treasury note to 2.58% from 2.47% late Tuesday. Gold prices eased $2.20 to $1248.10. The greenback fell 0.8% against a basket of currencies.

Today's futures suggest a flat to slightly higher open as investors remain circumspect ahead of Friday’s important payroll report. The day's news calendar has weekly jobless filings, pending home sales and retail numbers on schedule.

A small drop in weekly unemployment claims has sent the Dow Jones industrial average futures up 11 points, or 0.1%, to 10,283. Standard & Poor's 500 index futures are up 1.70 points, or 0.2%, to 1,083.40, while Nasdaq 100 index futures are up 3 points, or 0.2%, to 1,823.

So far, retailers' comparable sales numbers for August have fared better than Street’s projections. Higher gasoline prices and foreign currency gains pushed up Costco’s (NASDAQ:COST) same-store-sales 7% in August, versus estimates of 4.2%. Hot Topic’s (NASDAQ:HOTT) same-store-sales, however, fell 3.7%, versus estimates of a 6.2% decline; Zumiez’s (NASDAQ:ZUMZ) rose 9.1%, versus estimates of 7.7%; Stage Stores’ (NYSE:SSI) edged up 0.5%, versus estimates of a 1.5% rise; Limited (NYSE:LTD) up 10%.

All ten S&P500 industry sectors marked gains on the day, led by impressive gains of more than 3% in industrials (+3.8%), oil and gas (+3.7%), financials (+3.7%), basic materials (+3.4%), and consumer services (+3.2%). Ninety-eight percent of its components measured gains; however, the index failed a technical break out beyond its 50-day moving average of 1080.

Bank of America (NYSE:BAC), still trading near its year lows, led the DJIA shares higher with a 6% surge. Better-than-expected manufacturing data sent Caterpillar (NYSE:CAT) shares up 4.6%. General Electric (NYSE:GE) advanced 3.7%. On the other hand, Procter & Gamble (NYSE:PG), trading near its 52-week high, could gain only 0.4%.

Read the full analyst report on COST

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Read the full analyst report on ZUMZ

Read the full analyst report on SSI

Read the full analyst report on LTD

Read the full analyst report on BAC

Read the full analyst report on CAT

Read the full analyst report on GE

Read the full analyst report on PG