Stocks start month with rally after encouraging signs of growth in China, Australia

Stocks kick off new month with strong gains

NEW YORK — Stocks are surging after surprisingly strong growth in U.S. and Chinese manufacturing allayed worries about the global economy.

The Institute for Supply Management’s manufacturing index grew to 56.3 in August from 55.5 in July. Economists had been expecting a decline.

The positive report comes after a series of weak indicators on the U.S. economy got investors worried that the domestic recovery was losing steam.

Stocks were already climbing Wednesday after a report out of China showed that manufacturing was also growing in that country.

The Dow Jones industrial average is up 221, or 2.2 percent, at 10,237. The S&P 500 is up 26, or 2.5 percent, at 1,075, while the Nasdaq composite is up 52, or 2.5 percent, at 2,166.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

NEW YORK (AP) — Stocks surged Wednesday to start the new month of trading after upbeat signs of growth in China and Australia alleviated some worries about a global economic slowdown

The Dow Jones industrial average jumped nearly 115 points in early morning trading. Broad indexes also rose more than 1 percent.

The big gains are somewhat of a surprise after payroll company ADP said private employers cut 10,000 jobs in the U.S. last month. Stocks were hammered in August as economic reports regularly indicated domestic growth was slowing. The ADP report followed that trend.

Traders are still waiting on a key monthly report on the manufacturing sector due out later in the day. It too is expected to show the U.S. economy is expanding, but at a sluggish pace.

Domestic concerns were set aside, at least temporarily, in favor of more upbeat news overseas. The pace of expansion in China’s manufacturing sector rose in August for the first time in four months. Australia’s economy grew by the fastest pace in three years during the second quarter.

Stocks have been volatile over the past month because of uncertainty about the direction of the economy. Data continues to point to meager growth in the U.S., but exactly where the pace of growth settles during the second half of the year remains a major question. By sending stocks lower throughout August, traders were betting that weak growth in the U.S. will eventually be a drag on corporate earnings.

However, many big companies that compose the Dow and Standard & Poor’s 500 indexes rely heavily on business overseas, so they could be helped by expectations for foreign expansion.

In early morning trading, the Dow rose 114.36, or 1.1 percent, to 10,133.47. The S&P 500 rose 14.05, or 1.3 percent, to 1,063.38, while the Nasdaq composite index rose 31.22, or 1.5 percent, to 2,145.25.

With stock markets rising worldwide, U.S. Treasury prices dropped and interest rates rose. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.53 percent from 2.47 percent late Tuesday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans.