May 01, 2012 at 10:58 AM EDT
ISM Surprise Gives Stocks a Jolt; Financials Rising
The ISM manufacturing index grew with surprising vigor in April, to 54.8% from 53.4% in March. It was the fastest growth in 10 months, and caused major equity indexes to spike after its 10 a.m. release. The manufacturing index was expected to stay about flat or drop slightly. A reading above 50% indicates that the [...]

The ISM manufacturing index grew with surprising vigor in April, to 54.8% from 53.4% in March. It was the fastest growth in 10 months, and caused major equity indexes to spike after its 10 a.m. release. The manufacturing index was expected to stay about flat or drop slightly. A reading above 50% indicates that the sector is expanding.

After initial weakness, the S&P 500 is now up almost 1%. Financial stocks lead the rise, and JPMorgan Chase (JPM) rose 2.3%.

New orders rose to 58.2% from 54.5% and the employment gauge also rose. After a disappointing 2.2% rise in first quarter GDP, this report provides evidence that the U.S. economy is still healthy, wrote John Ryding and Conrad DeQuadros of RDQ Economics:

“This report is a shot in the arm for those who, like ourselves, do not see the economy slowing in the first half of 2012.  The overall ISM was the strongest in ten months, while the more leading indicator of new orders was the strongest in a year (and there was a particularly impressive gain in export orders).  The coincident indicators of employment and production also firmed, with production gains the strongest since March (and the decline in inventories suggest the production gains are not adding to inventory).  Input price pressures remained elevated as the prices paid index held steady at 61.  We continue to believe that last week’s first-quarter GDP report understated U.S. economic growth and that the economy is on a firming trend.”

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