Income, Manufacturing Numbers Boost Stocks to Open Month

Stocks bounced off a three month low, as good news on personal income and manufacturing were the catalyst for a rally.  The morning started off on a good note with consumer spending ticking up by 0.2 percent in December and personal incomes increasing by 0.4 percent.  The good news continued, as the Institute for Supply Management's manufacturing index rose to 58.4.  This was significantly higher than the consensus estimate of 55.5.

Exxon Mobil added fuel to the rally, with fourth quarter earnings coming in at $6.05 billion, or $1.27 a share.  This was above the consensus estimate of $1.19 a share.  On the news, the company's shares were up by 2.7 percent and it helped move the energy sector up by three percent on the day.  The only sector in the S&P 500 to have higher gains was the commodities sector, which gained 3.7 percent.

In a reversal of the pattern that we've seen for the past few days, where good news on GDP and the reappointment of Ben Bernanke caused stocks to decline, the markets climbed on the good news.  The Dow was up by 1.2 percent, closing at 10,186.  The S&P 500 climbed by 1.4 percent to 1,089.  And the Nasdaq rose by 1.1 percent to 2,171.

David Dreman, chair of the value investing firm that bears his name, said "the trend of the market is up.  There's still good value to be picked up and we're getting close to 100 percent invested in stocks."  His optimism was shared by the chief investment officer of Wilbanks, Smith & Thomas in Norfolk, Virginia, who said "we won't get more than a 10 percent correction because the corporate earnings numbers are simply too good."  Another concurring voice of optimism came from Christiana Bank & Trust in Greenville, Delaware, which said that "the manufacturing number...stops the near-term sell-off in the market and it supports Friday's GDP data."

Other analysts were talking about the possibility of the January employment report coming in higher than the consensus and warned that a better than expected jobs report could cause the Fed to not only end its quantitative easing but to being to raise interest rates more quickly than anticipated.  This would squelch any rally in stocks.

Still, though, the portfolio manager of the Alpine Dynamic Dividend Fund said that the latest economic data showed "the economy and the recovery seem to be on track," which is positive news for investors and the country as a whole.

If the analysts and portfolio managers are correct, then investors should take advantage of any pullback in the market to add to their positions.  When good companies are on sale, investors need to take advantage of this.