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Stocks up as U.S. manufacturing expands for first time since July

U.S. & China to sign "Phase One" trade deal
U.S. & China to sign "Phase One" trade deal 07:25

U.S. factories expanded unexpectedly last month, snapping a five-month losing streak. The turnabout in manufacturing cheered investors, with the Dow Jones Industrial Average gaining about 1% in Monday morning trading.

The Institute for Supply Management, an association of purchasing managers at companies around the country, said Monday that its manufacturing index rose to 50.9 in January from 47.8 in December. Anything above 50 signals expansion.

The index had showed U.S. manufacturing contracting from August through December, partly because President Donald Trump's trade war with China had raised costs and uncertainty. Economists had expected another bad month in January. 

But the easing of trade tensions, with President Trump and Chinese Vice Premier Liu He signing a long-awaited "Phase One" trade deal last month, may have helped U.S. factories regain some lost ground.

New orders, production and export orders all grew last month. Factory hiring dropped for the sixth straight month but at a slower pace than it did in December. Factories, the ISM said, were struggling to find workers at a time when the unemployment rate is at a 50-year low 3.5%.

Made in the U.S.A. 08:20

The manufacturing data indicates that "prospects for factory sector activity are starting to improve, while adding to the broader evidence that the economy is turning a corner," Andrew Hunter, senior U.S. economist at Capital Economics, wrote in a research note emailed to CBS MoneyWatch.

The Dow Jones rose 306 points to 28,562 in Monday morning trading. The S&P 500 and tech-heavy Nasdaq also rose more than 1% in early trading.

Despite the truce in the trade war, the United States continues to levy tariffs on more than $350 billion worth of Chinese imports.

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