U.S. Factory activity rose in January, suggesting ongoing improvement in economic growth, according to the Institute for Supply Management.
U.S. construction spending unexpectedly fell in December to touch its lowest level in nearly 10-1/2 years as investment in both public and private projects declined.
VIMOMBI NSHOM, ECONOMIST, IFR, A UNIT OF THOMSON REUTERS:
Despite an encouraging advance estimate of fourth quarter investments in structures and private residences (up 0.8 percent and 3.4 percent respectively), the lull in housing starts from September and October finally showed through in construction activity and the waning from government support programs ended up having a larger-than-expected drag on construction, as public construction fell by 2.8 percent.
GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI:
It's a good number. Manufacturing is outperforming other parts of the economy, but we're also seeing some inflationary seeds in costs rising. Overall, it looks like inventories are still in line with orders. We're looking for good manufacturing activity in the first quarter of the year.
GUS FAUCHER, DIRECTOR OF MACROECONOMICS, MOODY'S ANALYTICS, WEST CHESTER, PENNSYLVANIA:
This is consistent with the broader economy. Conditions have noticeably improved in the last few months. Consumers are spending more. They are feeling more confident. Business investment is strong. We are seeing rising demand for goods at home and abroad. We are going to see this stronger demand translating to more job growth very soon.
HUGH JOHNSON, CHIEF INVESTMENT OFFICER OF HUGH JOHNSON ADVISORS LLC, ALBANY, NEW YORK
First of all, it is a modest increase telling us that the manufacturing sector of the economy continues to improve somewhat steadily since July of 2010, that is very good news.
Secondly, supplier deliveries, vendor deliveries, is a component of the index of leading economic indicators, and rose. That is also good news and suggests that the manufacturing sector of the economy will continue to improve or expand in the months ahead.
On prices paid, there was a significant increase in the percentage of purchasing managers that reported higher prices, and that is getting up to a lofty level. It is useful as a leading indicator of inflation and tells me the Federal Reserve will be successful in preserving the rate of inflation.
Manufacturing employment also has been steadily improving since June of 2010. This is on balance, good news and I defy anybody to find a problem with this.
JOHN DOYLE, FOREIGN EXCHANGE STRATEGIST, TEMPUS CONSULTING, WASHINGTON:
We're seeing the U.S. economy pulling out of the recession. We saw that obviously with the GDP numbers last week and we're looking for a continued trend of positive growth.
Manufacturing has continued to grow for the 18th month, which is a strong sign for the U.S. economy. We also saw strong manufacturing numbers out of the UK and what it's showing is that the G-7 countries are continuing to pull out of the recession. Overall, it's a good thing for the global economy. But at the same time, we're seeing an increase in risk appetite on the back of those numbers and that's weighing on the U.S. dollar.
MARK LUSCHINI, CHIEF INVESTMENT STRATEGIST AT JANNEY MONTGOMERY SCOTT IN PHILADELPHIA:
The headline number continues to show improvement. We're now breaching 60 and that affirms what we've been seeing sequentially over the past six months, which is that the economic scenario here is moving toward a sustainable expansion. Within the ISM number, you can see that prices paid jumped as well. Given what's happening on a global basis with inflation, that's a little disconcerting. You may see that reflected in the bond market.
Construction spending was down, but I think some of that is weather-related. I would chalk the weakness up to seasonal factors, so I'm not concerned about it.
DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:
ISM strong with only inventories a bit on the dull side -- still firm -- and construction spending weaker off a downward revision, but surely weather has a function.
The (Treasuries) market is responding with weakness across the board so weaker but not specific to one sector or another.
So far range parameters are not being challenged but as a reminder that's support at 3.50 percent in tens and 4.67 in thirties. Trading volumes are about average at 105 percent, but are decelerating from stronger volumes earlier this morning.
ERIC KUBY, CHIEF INVESTMENT OFFICER, NORTH STAR INVESTMENT MANAGEMENT CORP., CHICAGO:
ISM data was a little better than expected, which was a positive. You're seeing general strength in the economy but not strength from the construction sector.
Manufacturing seems to clearly be an area of strength, and it is the combination of manufacturing picking up and the consumer picking up, that's most of the economy.
MARKET REACTION: STOCKS: U.S. stock indexes rallied BONDS: U.S. Treasury bond prices slipped. FOREX: The dollar rose against the yen and the euro.