AP – A drop in oil prices and strong bond auctions in Europe drove stocks to a slightly higher close Thursday. The Standard & Poor’s 500 index rose for the fourth straight day.

The Dow Jones industrial average gained 21.57 points, or 0.2 percent, to end at 12,471.02 It was down most of the day, losing 64 points in the first hour of trading, following a spike in unemployment claims and a weak report on December retail sales.

Materials and industrial companies led the afternoon recovery. Caterpillar and Alcoa rose the most in the Dow. The S&P 500 finished up 3.02 points, or 0.2 percent, at 1,295.50. The Nasdaq composite rose 13.94 points, 0.5 percent, to 2,724.70

Stocks drove higher in the last hour and a half of trading after oil prices dropped below $100 per barrel for the first time this year. Oil fell on rumors that Europe will delay an embargo on Iran. Crude plunged $2 a barrel in just eight minutes, ending at $99.

Also pushing stocks were strong bond auctions in Italy and Spain. European markets ended mostly higher rose after Italy and Spain held highly successful bond auctions, easing worries about Europe’s debt crisis. Italy’s benchmark stock index rose 2.1 percent.

AP
FILE – In this Jan. 10, 2012 photo, a pair of… View Full Caption

In Italy’s first bond auction of the new year, the country was able to sell one-year bonds at a rate of just 2.735 percent, less than half the 5.95 percent rate it had to pay last month. That’s a signal that investors are becoming more confident in Italy’s ability to pay its debts.

Spain was able to raise double the amount of money it had sought to raise in its own bond sale as demand for its debt was strong. Both auctions were seen as important tests of investor sentiment.

Investors have been worried that Italy and Spain, the third- and fourth-largest countries in the euro area, might get dragged into the region’s debt crisis. Greece, Ireland and Portugal have been forced to get relief from their lenders after their borrowing costs spiked to levels the countries could no longer afford.

The euro rose nearly a penny against the dollar, to $1.28, as worries eased about Europe’s financial woes. The currency, which is shared by 17 European countries, fell to a 16-month low against the dollar the day before.

In other trading, corn futures plunged 6.1 percent to $6.12 per bushel after the government reported that supplies of the grain were higher than traders had expected. Wheat also fell 5.6 percent. An auction of 30-year Treasury bonds drew meager interest from investors as cash flowed back into European debt.

It was the latest day of quiet trading in the stock market. There have been six consecutive days with moves of less than 1 percent in the S&P 500, the quietest stretch since May.

Ralph Fogel, investment strategist and partner at Fogel Neale Partners in New York, said the moderate moves were an encouraging sign following the steep rises and sudden declines that were typical of last summer. “This is a much healthier market than we’ve seen.”

Unemployment benefits spiked last week to the highest level in six weeks, mostly because companies let go of thousands of holiday hires, the government reported. Retail sales barely rose in December and were lower than analysts were expecting.

BEIJING (Reuters) – China’s exports and imports grew at their slowest pace in more than two years in December as foreign and domestic demand ebbed, data showed on Tuesday, bolstering expectations of more policy action from Beijing to support the world’s number two economy.
Annual export growth of 13.4 percent in December was in line with expectations, albeit the slowest since November 2009 except for a February distortion caused by Lunar New Year holidays.
But it was a big downside surprise for import growth that caught investor attention, sinking to a 26-month low of just 11.8 percent year-on-year versus the 17 percent forecast by economists in the benchmark Reuters poll.
“We thought imports would surprise quite a bit on the downside and generally the implication is negative. Domestic demand is slowing down very quickly,” Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters.
Zhang said the scale of drops in annual import growth for domestic consumption, at 13.5 percent in December versus November’s 27.4 percent, and imports for processing trade at 6.2 percent versus about 11 percent in November, were crucial.
“That means going forward for the next couple of months exports will decline with a very high certainty,” he said. “This trade data basically confirms our view that the first quarter is going to be very tough.”
The December trade data is a key link in a series of activity indicators to be published by China over the next two weeks, including fourth-quarter gross domestic product that is likely to show the world’s second-largest economy suffering its worst quarter in 2- years.
Financial markets took the data in their stride, with hopes that it will prompt a relaxation of monetary policy offsetting fears over slowing growth.
Gains in Chinese stocks accelerated modestly after the data, with Shanghai’s main index up around 1.6 percent by 0515 GMT, broadly in line with other Asian markets outside Japan, while the yuan strengthened to 6.3122 per dollar.
TRADE SURPLUS
Despite easing growth rates, the total value of China’s imports and exports finished 2011 at an all-time high of $3.6 trillion. But the overall trade surplus shrank to a three-year low of $155 billion from 2010’s $183.1 billion.
The narrowing trade surplus for the year may help China argue that it is reforming its currency policy, countering foreign critics who accuse it of holding the yuan artificially low to give its exporters an unfair competitive edge.
But the pace of slackening trade is disconcerting for Beijing as exporters are mainstay employers in China, even though their output accounted for only around 7 percent of China’s 2010 GDP.
The softening domestic demand revealed by the data also complicates plans by China’s ruling Communist Party to rebalance the economy towards more internal demand and consumer imports and tilt it further away from exports.
“The main disappointment is with imports, which show a much weaker number compared to November and are way below consensus,” said Kevin Lai, an economist at Daiwa Capital Markets, in Hong Kong. “That means the boost in November was temporary, the domestic economy is slowing sharply. China will have to continue to relax policy to protect domestic demand.”
POLICY FINE-TUNING AHEAD
To counter patchy demand in the United States and Europe, China’s top two export markets, Beijing cut banks’ reserve requirements by 50 basis points in November to 21 percent, the first such cut in three years to boost corporate credit lines.
Economists see more cuts to required reserve ratios (RRR) coming, further tweaks to fiscal policy and quite possibly intervention to slow the steady appreciation of the yuan, which gained about 4.5 percent against the dollar in 2011.
“I think the authorities will intensify the fine-tuning. I think we will get an RRR cut pretty quickly, and I think the slowdown in the pace of RMB (yuan) appreciation will continue,” Tim Condon, head of Asian economic research at ING in Singapore, said.
M2 money supply data published on Sunday showed money growth hitting a four-month high in December, suggesting Beijing is adding cash to the financial system to ease credit strains and stimulate the economy.
Economists see slowing trade and tight domestic credit conditions dragging China into its worst quarter in 2- years between October and December, with GDP growth easing to 8.7 percent, down a full percentage point from the first quarter.
A Reuters poll in December showed analysts thought China could lower banks’ reserve requirements by another 200 basis points in 2012, but that a cut in interest rates was only likely if economic growth slips below 8 percent.
Many economists believe China needs to grow its economy by about 8 percent, at least, if it wishes to create enough jobs to sustain current employment rates.
China does not release any reliable jobs data, and its only measure of unemployment is an urban jobless rate that has hovered between 4.1 and 4.3 percent since June 2009.
The thing economists are sure about is that, even allowing for seasonal factors that could smooth some of the more disturbing trade numbers — an earlier than usual Lunar New Year in 2012 and reasonably steady exports — China faces serious economic headwinds in the months ahead.
“Half of China’s export markets are slowing in the first half of the year so that’s why expectations for growth remain downbeat,” said Li Wei, an economist at Standard Chartered, in Shanghai.
“It’s not the end of the slowing down part of the story. That will probably last another quarter or four or five months before momentum recovers along with other emerging markets.”
(Additional reporting by Beijing Economics Team; Writing by Nick Edwards; Editing by Alex Richardson)

Reuters – A Saskatchewan lawyer said on Monday that he will file a C$15.4 billion ($15 billion) class action lawsuit against the Canadian government over the dismantling of the Wheat Board’s grain marketing monopoly.
But Agriculture Minister Gerry Ritz called the proposed legal action “baseless” and said it would not affect Ottawa’s moves to overhaul the Wheat Board and create an open grain market in Western Canada.
Lawyer Tony Merchant said the government must pay western farmers for the Canadian Wheat Board’s assets, which he said include C$100 million in cash, 3,402 rail hopper cars, Great Lakes freighters, an office building and other assets.
In addition, Merchant said in an interview, Ottawa should also pay compensation for the value of the CWB itself and the value of its marketing monopoly – including the premium prices some say it gets for grain and savings on transportation costs.
“(The government) can do whatever they like, but when they take away assets, then they have to pay,” Merchant said.
He said the Conservative government must compensate farmers for what they are losing, similar to how the former Liberal government paid farmers for removing a grain transportation subsidy in the 1990s.
The move is the latest of several legal entanglements around the government’s move to end the world’s last major agricultural monopoly, which has sharply divided farmers.
“It’s disappointing to see further misguided legal action against Western Canadian farmers and their right to the same freedoms as farmers in Ontario already enjoy,” Ritz said in a statement.
“This baseless action in no way affects the duly passed Marketing Freedom for Grain Farmers Act or western farmers’ ability to forward contract right now for an open market on August 1, 2012.”
The proposed class action may struggle to prove that the government’s change has hurt farmers, said Gerry Chipeur, a Calgary, Alberta-based lawyer.
“It’s going to be very difficult to say you made less money this year and the reason you made less money is because you don’t have a monopoly anymore,” Chipeur said in an interview.
LEGAL RISKS
Grain handlers are already buying farmers’ next wheat and barley crops through forward contracts, and such deals already carry some legal risk.
Eight of the CWB’s former farmer-elected directors, who were removed when Ottawa took control of the board last month, will ask a Manitoba court on January 17 to suspend the open-market law until another court can determine whether the law is valid.
The Conservative government passed a law in December ending the board’s marketing monopoly over Western Canada’s wheat and barley for milling or export, as of August 2012.
Also in December, a Federal Court judge ruled Agriculture Minister Ritz broke the existing law by not allowing a farmer vote before moving to end the monopoly, but the judge also said that the ruling did not affect the government’s new legislation.
The proposed lawsuit – which has yet to win court approval as a class action – is not likely to rattle the grain industry much since it does not affect the new law, said Wade Sobkowich, executive director of the Western Grain Elevators Association.
“The focus still needs to be on what’s happening at the Manitoba court and the Federal Court – that’s what people are going to be most concerned (about).”
Once the CWB monopoly disappears, Western Canadian farmers will be able to sell their wheat and barley to any buyer, not just the Wheat Board, but some believe the marketing monopoly gave them added clout to receive the highest prices.
Merchant is a former provincial Liberal politician in Saskatchewan, and his wife, Pana Merchant, is currently a Liberal senator. But he said their political affiliation was not a factor in launching the suit against the Conservative government.
The lawyer said he will now seek to sign as many farmers as he can to his class action, which may be certified within six months. It would likely take two or three years to resolve the case, he said.
($1=$1.02 Canadian)
(Reporting by Rod Nickel in Winnipeg; editing by Rob Wilson)

AFP – Smartphones and tablet computers will help push worldwide consumer electronics spending over $1 trillion this year but growth is sluggish compared to last year, according to industry analysts.
“Most product categories are slowing down or going into contraction,” Steve Bambridge, global business director for GfK Boutique Research said Sunday ahead of the annual Consumer Electronics Show (CES) in Las Vegas.
“Really there’s two main exceptions: tablets and smartphones,” Bambridge said at a briefing for reporters before the official opening Tuesday of the high-tech gadget extravaganza.
GfK and CES sponsor the Consumer Electronics Association (CEA) forecast that global spending on technology products will grow five percent in 2012 to $1.04 trillion compared to eight percent growth last year and $993 billion in sales.
GfK and CEA said they expect smartphone sales to grow 22 percent this year compared with 59 percent last year while overall tablet sales are expected to double to more than 100 million this year.
As demand slackens in the United States and Western Europe grapples with an economic crisis and wobbly euro emerging markets such as Brazil, China and India will increase their share of spending on consumer electronics, GfK and CEA said.
Emerging economies are expected to account for 46 percent of global tech sales revenue in 2012, up from 37 percent in 2008, while developed economies will see their share fall to 54 percent from 63 percent over the same period.
CEA chief economist Shawn Dubravac said he expects more than 20,000 new products to launch at CES, which brings together over 2,700 exhibitors from around the world to the cavernous Las Vegas Convention Center.
Last year, more than 100 tablet computers alone were unveiled at CES as rival manufacturers sought to capture the magic of Apple’s hot-selling iPad.
Dubravac said he expects to see about 50 new tablets this year and a plethora of snazzy smartphones which he described as “more like full-fledged computers.”
Another hot product category at CES this year is expected to be the sleek, lightweight laptop computer known as the “ultrabook,” DuBravac said.
He said he expected to see between 30 and 50 ultrabooks launched at CES as computer makers again seek to make up ground on Apple and its popular MacBook Air.
Getting the jump on the competition, Taiwan’s Acer on Sunday took the wraps off what it said was the world’s thinnest laptop computer, the Acer Aspire 5, which has a 13.3-inch (34-centimeter) screen and is 0.59 inches (15 millimeters) at its thickest point.
It weighs less than three pounds (1.35 kilograms).
Desktop personal computers on the other hand are a category of device which is “in decline if not completely dead,” said CEA director of industry analysis Steve Koenig.
Television sales, meanwhile, are expected to be flat with whatever growth there is coming from emerging markets.
DuBravac said he expects to see more televisions capable of connecting to the Internet as the convergence of the Web and the TV set “evolves quite rapidly.”
DuBravac said 12 percent of the TV sets sold in the United States in 2010 were Internet-enabled but nearly half of all televisions shipping in the US in 2012 will be able to tap into the Web.
He said he expected more products to incorporate gesture or voice control — features of Microsoft’s Kinect game console or Apple’s iPhone 4S voice assistant Siri — providing a “much more natural experience for many users.”
There also may be hope for anyone ever faced with the bewildering array of buttons on a television remote control.
“I think 2012 will be the year of the interface,” DuBravac said, with an emphasis on moving from “complexity to simplicity.”

AFP – Chrysler is poised to rake in almost $2 billion in cash this year after sales of cars and trucks soared in 2011, the head of the US automaker and Italy’s Fiat, Sergio Marchionne, said Monday.
“We’re generating cash. The house is in good order,” Marchionne told a news conference at the annual Detroit auto show.
He estimated “almost two billion” would flow into the Fiat-controlled company’s coffers.
Chrysler Group, the smallest of the Detroit “Big Three” automakers, has made a solid U-turn under the guidance of Marchionne after emerging from bankruptcy in 2009.
The company raised its 2011 forecast of cash flow to more than $1.2 billion from previous estimate of above $1.0 billion when it reported in October a swing into profit in the third quarter.
Last week the Auburn Hills, Michigan-based company posted the biggest 2011 gain in US vehicle sales among its major competitors: a jump of 26 percent from the prior year.
Confirming that by 2015, Fiat and Chrysler “will be one single company,” Marchionne said that operationally “it is already functioning as one company.”
Marchionne, the chief executive of Fiat and Chrysler, said the next steps will involve defining the corporate structure of the transatlantic firm.
The decision on where to locate the future company’s headquarters has not been made, but he confirmed media reports that it could be in the Netherlands.
“The Europeans would see it as a victory” and “the Americans wouldn’t care” as long as Chrysler remains a viable company, he said.
Fiat took over operational command of the US automaker in June 2009, when Chrysler emerged from a government-supported bankruptcy. In June 2011, it took a majority stake and now controls 58.5 percent of the company.

Bloomberg – The dollar fell the most in more than a month against the euro as signs manufacturing is expanding in the U.S. and China damped the appeal of safer assets.

The greenback weakened versus all of its most-traded peers after a U.S. factory gauge indicated the fastest growth in six months. Purchasing-manager indexes this week for China and India also showed manufacturing gains. The euro snapped a seven-day losing streak versus the yen, its longest since December 2010, after German unemployment fell more than forecast. Australia’s and New Zealand’s dollars rose to the strongest since November.

“The data that came out today was pretty positive,” said Mary Nicola, a currency strategist at BNP Paribas SA in New York. “It helped boost risk sentiment.”

The dollar fell 1.1 percent to $1.3073 per euro at 2:09 p.m. in New York in its biggest intraday decline since Nov. 30. The U.S. currency declined 0.3 percent to 76.66 yen. The euro gained 0.7 percent to 100.20 yen after falling to 98.66 yesterday, the weakest level since December 2000.

The greenback remained weaker versus its major counterparts after minutes of the Federal Reserve’s last policy meeting, released today, showed central-bank officials will for the first time make public their forecasts for the benchmark interest rate at their Jan. 24-25 meeting.

The Standard & Poor’s 500 Index of stocks climbed 1.7 percent and the Thomson Reuters/Jefferies CRB Index of raw materials added 2.6 percent.

The Institute for Supply Management’s factory index rose to 53.9 in December from 52.7 a month earlier, the Tempe, Arizona- based group’s data showed today. Fifty is the dividing line between growth and contraction, and economists surveyed by Bloomberg News projected the gauge would climb to 53.5.

‘More Risk-On’

“You get a good number like this and it continues” the trend, said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “The dollar is falling off, and it’s a little bit more risk-on.”

Brazil’s real gained the most against the dollar among its 16 major counterparts tracked by Bloomberg, adding 2.2 percent to 1.8306 per greenback. Mexico’s peso appreciated 1.7 percent to 13.6822 to the dollar.

China’s purchasing managers’ index for manufacturing increased to 50.3 last month from 49 in November, the logistics federation said Jan. 1. The reading exceeded all forecasts in a Bloomberg survey. India’s PMI for manufacturing rose to the highest in six months, HSBC Holdings Plc and Markit Economics said yesterday.

Dollar Index

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped 0.9 percent to 79.559.

The dollar has fallen 0.8 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The greenback gained 1.1 percent last year, snapping two years of losses. The euro was the worst performer in 2011, sliding 2 percent.

U.S. employers added 150,000 jobs in December, compared with an increase of 120,000 in November, according to the median estimate of economists in a Bloomberg News survey. The Labor Department will release the report Jan. 6.

The euro extended gains after the Nuremberg-based Federal Labor Agency said German unemployment fell in December more than economists forecast. The number of people out of work slid a seasonally adjusted 22,000 to 2.89 million, the agency said. Economists forecast a drop of 10,000, a Bloomberg survey showed.

Basis Swaps

The cost for European banks to borrow in dollars tumbled to the lowest level in two months, according to a money-markets indicator. The three-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, touched 1.04 percentage points below the euro interbank offered rate, the least expensive since Nov. 9 on an intraday basis, according to data compiled by Bloomberg. It closed yesterday at 1.14 percentage points below Euribor.

Canada’s dollar may appreciate to a two-month high against its U.S. counterpart if it closes stronger than its 100-day moving average of C$1.0143, according to MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America Corp in New York. Such a close may spur the currency to parity, a level it hasn’t been at since Nov. 1. The currency gained 0.8 percent today to C$1.0107.

The Australian and New Zealand currencies climbed as equities rallied.

Australia’s dollar strengthened 1.3 percent to $1.0363 after climbing to as high as $1.0386, the strongest level since Nov. 9. The New Zealand dollar advanced 1.4 percent to 78.94 U.S. cents. It reached 79.06 cents, the most since Nov. 14.

European Crisis

Gains in the euro were tempered by concern the European debt crisis will hamper economic growth in the region.

European services and manufacturing output shrank for a fourth month in December, according to a Bloomberg survey before a report tomorrow from London-based Markit Economics. The data will confirm a composite index based on a survey of purchasing managers rose to 47.9 in December from 47 in November, below the 50 that indicates contraction, economists predict.

Futures traders last week boosted bets the euro will weaken. The number of wagers made by hedge funds and other large speculators betting on a drop in the 17-nation currency increased to a record 127,879 contracts more than those anticipating a gain, according to the Washington-based Commodity Futures Trading Commission.

–With assistance from Kristine Aquino in Singapore. Editors: Greg Storey, Dave Liedtka

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

LA Times – Oil prices soared Tuesday as tensions grew over key Persian Gulf oil shipments.

In afternoon trading benchmark crude jumped $3.80, or 3.8 percent, to $102.63 per barrel in New York.

Brent crude, which is used to price foreign oil varieties that are imported by U.S. refineries, rose $3.87, or 3.6%, to $111.25 per barrel in London.

Prices climbed as soon as exchanges opened for the first day of 2012 trading. Commodity prices tend to rise at the beginning of January as investors start the new year with a fresh round of trading. This year prices were driven by heightened concerns that Iran might try to close the Strait of Hormuz in the Persian Gulf to oil tankers, if Western nations impose new sanctions.

Iran warned the U.S. to stay out of the strategic waterway, where one-sixth of the world’s oil shipments pass every day. On Monday its navy fired a cruise missile as part of a military exercise.

The U.S. and European nations are mulling further economic sanctions against Iran because of its nuclear program. A standoff could result that would be damaging to the global economy.

A dustup with Iran could slow crucial oil supplies at a time when the world needs every drop. Global oil demand is expected to rise to a record 89.5 million barrels per day in 2012.

Three of the world’s largest economies — the U.S., China and India — continued to grow with increased manufacturing activity in December.

A private trade group said that U.S. manufacturing expanded last month at the fastest pace in six months. The Commerce Department also said that U.S. construction spending jumped in November on a spate of new projects for single-family homes and apartments.

In other energy trading Tuesday, heating oil rose 12 cents, or 4.2%, to $3.04 per gallon, while gasoline futures rose by 8 cents, or 3 percent, to $2.74 per gallon. Natural gas was virtually unchanged at $2.99 per 1,000 cubic feet.

NEW YORK (Reuters) – Wall Street stocks kicked off 2012 with a rally on Tuesday after data showed U.S. manufacturing activity and construction spending picked up, signaling the economic recovery was gaining steam.
Investors, looking to put cash to work after a tough year in 2011, were also encouraged by data from China and Germany suggesting improvement in those major economies. The broad S&P index has risen more than 10 percent from its November 25 close.
The pace of growth in U.S. manufacturing accelerated in December, its best month since June, while a rise in new orders suggested decent momentum in 2012. Separately, construction spending in November surged to the highest in nearly 18 months.
“The beginning of the year tends to start out positive as people want to put money to work, but the overseas data can’t be overstated in its importance, especially since the U.S. data has been so strong as well,” said Sal Catrini, a managing director for equities at Cantor Fitzgerald & Co in New York.
The Dow Jones industrial average was up 178.54 points, or 1.46 percent, at 12,396.10. The Standard & Poor’s 500 Index was up 18.63 points, or 1.48 percent, at 1,276.23. The Nasdaq Composite Index was up 38.44 points, or 1.48 percent, at 2,643.59.
Financial stocks were among the market leaders as risk appetite returned. Both the S&P financial sector and materials companies’ stocks rose nearly 3 percent. Utility companies, considered a defensive play by investors, fell 1.4 percent as the weakest sector, dragged lower by Exelon Corp, which fell 3.9 percent after a downgrade from Macquarie.
Barclays Capital downgraded Intel Corp and other semiconductor stocks, predicting a “volatile” year for the group as an inventory correction extends into the first quarter.
JPMorgan upgraded its recommendation for Cisco Systems Inc, sending shares of the Dow component up 3.1 percent to $18.59.
Blue-chip 3M Co, maker of Post-it Notes and Scotch tape, is buying Avery Dennison Corp’s office and consumer products unit, the companies said. Avery Dennison rose 1.8 percent $29.19, while 3M added 2.2 percent to $83.51.
Shares of McDonald’s Corp, the Dow’s biggest gainer in 2011, fell 1.4 percent to $98.95 on Tuesday.
Investors may gain more insight into the Federal Reserve’s view of the economy when the Fed’s Open Market Committee is due to release minutes of its December 13 meeting at 2 p.m. (1900 GMT).
Market sentiment also gained after news China, the world’s largest consumer of metals, avoided economic contraction in December. Also boosting investors’ mood, German unemployment fell more than forecast.
Four-fifths of companies trading on the New York Stock Exchange rose, while 75 percent of Nasdaq-listed shares were in positive territory. Volume topped 3 billion shares.
(Reporting By Ryan Vlastelica; Editing by Kenneth Barry)

CNBC – US manufacturing activity-as well as employment in the sector-rose to its highest level since June, joining a series of economic reports that indicates Friday’s jobs number may be better than some expect.
The growth in the ISM Manufacturing index also matches a global trend of improving factory activity in December from the month before. The ISM index rose to 53.9 from 52.7 in November and 50.8 in October. A reading above 50 shows economic expansion.
“I thought the details were solid. Orders were up. Inventories were down. It suggests that maybe some of the momentum in the fourth quarter will carry into the new year,” said J.P. Morgan economist Michael Feroli.
The employment component rose to 55.1 from 51.8 in November, the highest since June.
“Manufacturing might be a kind of small part of the employment picture, but it’s consistent with some of the other indicators which should show it (December employment) to be a good report,” Feroli said.
Feroli said he is currently expecting December nonfarm payrolls of 185,000, above the consensus 150,000. The report is released Friday morning.
Pierpont Securities Chief Economist Stephen Stanley said while he does not see the employment component of the ISM to be that predictive of jobs, he does see the improvement in the index as a measure that could reflect a better hiring environment.
“There’ve been a lot of encouraging signs over the last month or two. Claims numbers are lower, certainly. The confidence board indicators are better. That’s something people look at, and it just seems anecdotally that things are getting better,” Stanley said. “I think there’s every indication the jobs market is improving.”
He said he forecast nonfarm payrolls at 135,000 at December but expects to revise up his preliminary number.
“I don’t expect any explosion in hiring over the next couple of months, but I think we’ll keep looking at incremental gains,” he said.
Follow Patti Domm on Twitter: @pattidomm

WASHINGTON (AP) – In a major shift, the Federal Reserve will start updating the public four times a year on how long it plans to keep short-term interest rates at record lows, according to minutes from its December policy meeting.
The first forecast will be included in the central bank’s economic projections after its Jan. 24-25 meeting, the minutes, or written records, said.
The change is the Fed’s latest move to make its communication more open and explicit. It could help assure investors, companies and consumers that rates won’t rise before a specific time. This might help lower long-term yields further — in effect providing a kind of stimulus.
The Fed has left its key short-term rate near zero for the past three years. In August, it that it plans to leave it there until at least mid-2013, unless the economy improves.
After its Dec. 13 meeting, the Fed issued a policy statement that portrayed the U.S. economy as improving slightly. The central bank declined to take any additional steps to boost growth.
In January, the Fed will release an interest rate forecast for the fourth quarter of 2012 and for the next few calendar years, the minutes show. It will update that forecast four times a year.
The minutes also suggest the Fed could be poised to launch a new step to invigorate the economy. Some members favored bolder action but said they wanted to wait until the more explicit communication policy was in place.
The plan to forecast interest rates follows a historic decision last year to have Fed Chairman Ben Bernanke hold news conferences four times a year. Bernanke has also done a number of interviews and sought other changes to make the Fed’s decision-making process more transparent.