Manufacturing data catches stock market by surprise

Friday's rally was triggered not only by the trend channel support, but more specifically the 10:00 a.m. ET manufacturing index released by the Institute for Supply Management. Economists had been anticipating the index to pull back from 53.5% in May to 52.3% in June. Instead, it unexpectedly rose to 55.3%. Readings over 50% indicate expansion and weak data in May (primarily attributed to the natural disasters which hit Japan) left many skeptical of the possibility of such a recovery. One component of the report, the employment index, offered particular comfort. The employment index rose from 58.2% in May to 59.9%. The main government report on employment for June is due out at the end of the week.

S&P 500 (Figure 2)

The Dow Jones Industrial Average ($DJI) ended the day on Friday with a gain of 168.43 points, or 1.36%, and closed at 12,582.77. All thirty of the Dow's index components ended Friday in the black. The top performers were Alcoa (AA) (+2.84%), JP Morgan Chase (JPM) (+2.19%), Caterpillar (CAT) (+2.03%), 3M (MMM) (+1.92%), and United Technologies (UTX) (+1.83%). The Dow ended the week with a gain of 5.4%. This was its strongest weekly gain since November 2008.

The S&P 500 ($SPX) gain of 19.03 points, or 1.44%, and closed at 1,339.67. The strongest percentage performers in the index were Motorola Mobility (MMI) (+6.53%), Apollo Group (APOL) (+6.36%), Darden Restaurants (DRI) (+6.09%), and Constellation Brands (STZ) (+4.76%). The rally in Darden Restaurants (DRI) followed its Thursday evening projection that 2011 earnings would beat Wall Street expectations. The weakest performers in the index were Hospira Inc. (HSP) (-1.75%), CF Inds. Holdings (CF) (-1.52%), and EOG Res. (EOG) (-1.41%). Only seventeen of the S&P 500's index components posted a loss. The S&P 500 finished the week higher by 5.6%.

Nasdaq Composite (Figure 3)

Marathon Oil (MRO) will show up on some systems as having had a severe loss on Friday, but in fact, the parent company spun off Marathon Petroleum Corp., which is the second-largest independent U.S. oil refiner. After prices were adjusted for the spinoff, MRO shares were up 3% and briefly hit a three-year high. Although MRO's spinoff had a strong showing on Friday, another spinoff, this time off Cablevision (CVC) had a more difficult welcome. Media company CVC spun off AMC Networks, which has risen in popularity thanks to hit shows "Mad Men" and "Breaking Bad". Shares of AMC fell 8.4%. CVC, on the other hand, ended the session higher by 2.5%.

The Nasdaq Composite ($COMPX) ended the session higher by 42.51 points, or 1.53%, on Friday and it closed at 2,816.03. The strongest performers in the Nasdaq-100 were Apollo Group (APOL) (+6.36%), Micron Tech. (MU) (+4.68%), Wynn Resorts (WYNN) (+4.20%), and SanDisk (SNDK) (+3.13%). Only four of the 100 index components ended the session with a loss. They were Vertex Pharmaceuticals (VRTX) (-0.56%), Check Point Software (CHKP) (-0.18%), Amgen Inc. (AMGN) (-0.12%), and Express Scripts (ESRX) (-0.04%).

Next page: Tuesday's outlook

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