U.S. stocks fluctuated Monday, with the Dow Jones Industrial Average rising and falling more than 100 points, after the pace of growth in the U.S. manufacturing sector slowed more than expected last month. Meanwhile, a rally in oil prices offset triple-digit losses earlier in the trading session.
UPDATED: 4 p.m. EST
After fluctuating throughout most of the session, U.S. stocks rebounded after oil prices extended Monday's rally. The Dow Jones Industrial Average, measuring the share prices of 30 large industrial companies, climbed 196.09 points, or 1.14 percent, to close at 17,361.04; the S&P 500 stock index added 25.86 points, or 1.30 percent, to end at 2,020.85; and the Nasdaq Composite rose 41.45 points, or 0.89 percent, to finish at 4,676.69.
Following a mixed batch of economic reports Monday, global oil prices rebounded and rallied above $53 a barrel, boosting investor sentiment. Brent crude, the benchmark for global oil prices, rose $1.44 percent Monday, to $54.50 a barrel, for March 15 delivery on the London ICE Futures Exchange. The futures contract for the U.S. benchmark West Texas Intermediate crude rose $1.33 Monday, to $49.57 a barrel, for March 15 delivery on the New York Mercantile Exchange. This was WTI's highest closing price in nearly a month.
Initially weighing on the U.S. financial markets Monday was a government report on consumer spending, which grew at its weakest pace since September 2009. Consumer spending, which accounts for nearly two-thirds of the U.S. economy, fell 0.3 percent after rising 0.5 percent in November, the Commerce Department said Monday.
Meanwhile, national factory activity dropped to its worst level in a year after new orders fell. This report weighed on investor sentiment and gave credence to mounting concerns regarding a slowdown in growth in the U.S. manufacturing sector. The ISM manufacturing index fell to 53.5 last month from 55.1 in December, which was the weakest reading since January 2014, the Institute for Supply Management said Monday. Economists had expected the index to rise to 54.5 in January, according to analysts polled by Thomson Reuters. A reading above 50 indicates expansion in the manufacturing sector.
“Even at that lower level, the index has still, historically, been consistent with GDP growth of close to 2 percent annualized,” Paul Ashworth, chief economist at London-based Capital Economics, said in a research note Monday. “So this decline is no reason to panic, particularly not since the firms in this sample include a lot of the big export-orientated manufacturers that we would expect to be hit hardest by the dollar's surge.”
Meanwhile, separate data showed U.S. manufacturing growth hovered around its slowest rate of expansion in nearly a year. The U.S. Manufacturing Purchasing Managers Index remained at 53.9 in January, unchanged from December, financial data firm Markit said in its report Monday. Slower new business growth was the main drag on the headline index in January. Survey respondents noted that improving economic conditions had boosted sales at the start of the year but export demand remained subdued.
“The fear is that the economy will become increasingly reliant on the consumer to sustain growth, which is another reason besides the economic slowdown to believe that policymakers will be wary of raising household’s borrowing costs via rate hikes any time soon,” Chris Williamson, chief economist at Markit, said in the report.
Looking ahead on the economic calendar, most of the focus this week will be on the U.S. nonfarm payrolls report for January. The report, due out Feb. 6, is expected to show U.S. employers added 235,000 jobs in January, down from 252,000 in December, according to analysts polled by Thomson Reuters. The unemployment rate is expected to remain unchanged from last month's reading of 5.6 percent. Average hourly earnings are forecast to increase 0.3 percent, and hours worked are expected to hold steady at 34.6 per week.
Below is the latest economic calendar for the week of Feb. 2. All listed times are EST.
- 8:30 a.m. -- Consumer spending
- 9:45 a.m. -- Markit services PMI (January)
- 10 a.m. -- ISM manufacturing PMI (January)
- 10 a.m. -- Construction spending
- 10 a.m. -- Factory orders (December)
- TBA -- Motor vehicle sales (January)
- Australia -- Reserve Bank of Australia interest rate decision
- New Zealand -- Unemployment rate
- 8:15 a.m. -- ADP employment (January)
- 10 a.m. -- ISM non-manufacturing PMI (January)
- 8:30 a.m. -- Weekly jobless claims
- 8:30 a.m. -- Trade deficit (December)
- 8:30 a.m. – Productivity (Q4)
- 8:30 a.m. -- Unit labor costs (Q4)
- U.K. -- Bank of England interest rate decision
- 8:30 a.m. -- Nonfarm payrolls (January)
- 8:30 a.m. -- Unemployment rate (January)
- 3 p.m. -- Consumer credit (December)
- Australia -- Monetary policy statement
- Canada -- Unemployment rate (January)