Wall Street Pares Gains After Weak Manufacturing Data

Wall Street kicked off the last month of the year on a positive note but pared early gains after data showed the U.S. manufacturing sector contracted in November, falling to its worst levels since June 2009.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 48.6, the first time the index went below 50 since November 2012. A reading below 50 indicates contraction in the manufacturing sector.

However, other data showed U.S. construction spending rose to a near 8-year high, suggesting the economy remains on firmer ground despite some slowing in consumer spending and persistent weakness in manufacturing.

Investors are keeping an eye on data for clues regarding the health of the U.S. economy that might enable the Federal Reserve to raise interest rates for the first time in nearly a decade.

Chicago Fed President Charles Evans is scheduled to speak at an event at 12:45 p.m. ET. Evans is a voting member of this year’s Federal Open Market Committee. Chair Janet Yellen is scheduled to speak on Wednesday and Thursday.

“Today’s gain is just noise before the market gets some clarity from the Fed and Yellen’s speech,” said Bob Andres, chief investment officer at Andres Capital Management in Berwyn, Pennsylvania.

Andres believes the data does not support a rate hike and if the central bank does tighten, subsequent hikes will be very gradual.

“The Fed has talked itself into a deeper conundrum and need to raise because if they don’t, it shows a lack of faith in the U.S. economy.”

The main data this week is the November employment report, which is expected to show that the economy added 200,000 jobs during the month. Analysts say a strong report virtually guarantees a rate rise this month.

At 10:46 a.m. ET the Dow Jones industrial average .DJI was up 106.77 points, or 0.6 percent, at 17,826.69, the S&P 500 .SPX was up 12.29 points, or 0.59 percent, at 2,092.7 and the Nasdaq Composite .IXIC was up 25.71 points, or 0.5 percent, at 5,134.38.

All 10 major S&P sectors were higher with the technology index’s .SPLRCT 0.95 percent rise leading the advancers. Alphabet (GOOG.O) Class C and Class A shares (GOOGL.O) were up about 2 percent and gave the biggest boost to the S&P and the Nasdaq.

Investors are also awaiting a European Central Bank meeting on Thursday, when the central bank is widely expected to ramp up its trillion-euro bond-buying program.

TerraForm Power (TERP.O) rose 29.35 percent to $8.92 after hedge fund Appaloosa Management sent a letter to the company, saying its move to buy higher-risk projects from the parent company, SunEdison SUNE.O, raises concerns for TerraForm’s stakeholders. SunEdison was up 3.4 percent at $3.30.

Joy Global (JOY.N) fell 11.1 percent to $13.64 after Streetinsider.com said Bank of America Merrill Lynch slashed its rating on the stock.

Mattress Firm Holding (MFRM.O) was up 8.8 percent at $53.63, a day after the company agreed to buy HMK Mattress Holdings, the owner of mattress retailer Sleepy’s.

Advancing issues outnumbered decliners on the NYSE by 2,080 to 810. On the Nasdaq, 1,413 issues rose and 1,186 fell.

The S&P 500 index showed 17 new 52-week highs and 3 new lows, while the Nasdaq recorded 73 new highs and 32 new lows.

REUTERS