US manufacturing in surprise June rebound
Top winner and loser
US stocks jumped following a surprise rise in factory activity in June, with the Dow Jones ending Friday up 1.4%.
Markets had expected the sector to cool further, after a sharp slowdown in May.
But according to the Institute of Supply Management survey, a pronounced build-up in factory inventories drove a rebound in the month.
Meanwhile, separate data was less encouraging, with consumer confidence dipping last month and building activity falling in May.
But Wall Street traders brushed off these more lagging indicators of the economy, as confidence grew that a recent soft patch in the economy may be behind them.
The Friday rally crowned the best performance by US stocks in two years, with the Dow Jones rising 5.4% for the week as a whole.
The ISM manufacturing survey for June gave a reading of 55.3 - up from 53.5 the month before and well ahead of expectations of a fall to 51.8.
Any level above 50 indicates expansion.
It was the first such rise for four months in the index, which before May's sharp fall had been registering above 60 every month since February.
The major role played by inventory build-ups - as opposed to new orders - left economists divided over how to interpret the data.
"We think it is reflective of a rebound in the manufacturing sector," said Michael Gapen, chief US economist at Barclays Capital.
"The main increase came in inventory, which suggests that firms think demand will rebound... It looks like there was a temporary slowdown, perhaps due to supply disruptions in Japan."
However, others took the opposite view, saying that the relative weakness of new orders suggested the pick-up might not be sustained.
Meanwhile, the University of Michigan's consumer confidence poll for June was revised down to 71.5 from a preliminary reading of 71.8 - marking an even sharper fall from May's level of 74.3.
Prior to the recession, consumer confidence had averaged around the 90 level.
"This challenges the notion that lower gas prices will inspire the consumer," said David Ader, head of bond strategy at CRT Capital, pointing out that the lower consumer confidence coincided with a fall in petrol pump prices.
Separately, the Commerce Department revealed that construction spending shrank 0.6% in May, to a level only slightly above the 11-year low registered in February.
A sharp fall in the number of new projects was attributed to spending cuts by state and local governments in the US.
Construction - both residential and commercial - has flatlined in the US economy over the last 18 months at a historically depressed level.