S&P 500 Heads For Record as Manufacturing Data Lifts Spirits

Traders work on the floor at the New York Stock Exchange. Photo by Michael Nagle /Bloomberg

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(Bloomberg) — US stocks rebounded on Monday after stronger-than-expected manufacturing data outweighed lingering questions about the interest-rate outlook following President Donald Trump’s decision to pick Kevin Warsh as the next Federal Reserve chair.

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The S&P 500 Index rose 0.7% at 2:31 p.m. in New York, putting the gauge on pace for a record close. The technology-heavy Nasdaq 100 Index rose 0.97%.

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“The strongest ISM-manufacturing figure in 41 months is bolstering confidence in the health of the domestic economy, lifting stocks, rates, and the greenback,” said José Torres, senior economist at Interactive Brokers.

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The advance came after manufacturing activity unexpectedly expanded in January at the fastest pace since 2022. The Institute for Supply Management’s manufacturing index rose to 52.6 from 47.9, according to data released Monday.

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“Manufacturing activity seems to be emerging from a cold winter, regardless of what Punxsutawney Phil says,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. “We’ve seen signs of life before, only for manufacturing to dip again, but with new orders growing, maybe this revival is real.”

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Trump’s nomination of Warsh to succeed Jerome Powell was seen as exerting a restraint on the stock market. Despite Trump’s pressure on the Fed to cut rates more deeply, Warsh is viewed by Wall Street as a relatively hawkish choice because of his track record as a Fed governor, when he raised concerns that easy monetary policy would increase inflation.

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“Hawkish perceptions on Warsh appointment still linger this morning,” said Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo. “We expect Warsh to support a more dovish stance with difficulty shrinking the Fed balance sheet of any materiality. We still believe two FOMC interest rate cuts for 2026 are in the offing.”

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How Wall Street views Warsh weighed on stocks and precious metals on Friday and continued to do so on Monday. For the former, Tom Essaye of the Sevens Report noted the market was “mildly disappointed” by the nomination as Warsh had made some less-than-supportive comments on quantitative easing and made calls for “regime change” at the central bank.

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“Bottom line, markets don’t ‘hate’ the Warsh choice, but markets view the Fed as a major ingredient of the 10+ year bull market in stocks and risk assets, so any potential change makes investors nervous, and we saw that Friday,” said Essaye.

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While the drop in precious metals has eased, both gold and silver are extending big slumps from Friday’s dramatic selloff. Russ Mould, investment director at AJ Bell, noted that there were “many different theories” as to why gold and silver have retreated so swiftly, including the metals being “ripe for a pull-back” after record rallies and the appointment of Warsh.

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“Whatever the explanation, gold and silver are now trying to recover and both are no lower than they were in early January,” said Mould.

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In terms of stock moves, Walt Disney Co. dropped after the media company gave an outlook analysts viewed as mixed. Meanwhile, energy stocks such as Exxon Mobil Corp. and Chevron Corp. dropped alongside oil prices as geopolitical risk premiums faded after Trump said Washington is talking with Iran. And crypto-linked stocks including Strategy Inc. dropped after Bitcoin prices slid to their lowest level since April over the weekend.

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