While you were sleeping: Stocks hit new highs as US manufacturing lifts mood

US stocks and the dollar gained, with the Dow Jones Industrial Average and the S&P 500 both closing at record highs, as reports of better-than-expected manufacturing activity bolstered optimism about the outlook for the economy and corporate profits.

"You've seen a pretty healthy first half of the year with earnings, when we (are) headed into Q3, there is a sense of optimism that you can see upfront," Nadia Lovell, US Equity Strategist, JP Morgan Private Bank, told Reuters.

Third-quarter earnings are expected to increase 6.2% from a year earlier, according to Reuters.

At the close of trading in New York, the Dow rose 152.51 points, or 0.7%,to 22,557.60. The Nasdaq Composite Index gained 0.3% to 6516.72 while the Standard & Poor's 500 Index advanced 0.4% to 2529.12.

An Institute for Supply Management report showed its index of US national factory activity climbed to 60.8 in September, the highest reading in 13 years and up from 58.8 in August.

"Much of the gain is presumably linked to the aftereffects of the hurricanes. Nonetheless, manufacturing growth is strong," John Ryding, chief economist at RDQ Economics in New York, told Reuters.

The Dow moved higher with major gains by General Electric, up 1.6%, and 3M, up 1.4%. Financials were also strong, with Goldman Sach and Citigroup both rising 1.5%.

The VIX, or the Chicago Board Options Exchange Volatility Index which measures expectations of future volatility in stocks, slipped 0.1% to 9.50.

MGM Resorts International, operator of the Mandalay in Las Vegas, fell 5.4% after a shooter from the hotel killed 58 people and injured more than 500 at an outdoor concert.

Metro falls on deal
Shares of Metro fell after the Canadian grocer said it planned to sell assets and was committed to maintaining its BBB credit rating as it agreed to buy Jean Coutu Group, a pharmacy chain, for about $C4.5 billion ($US3.6 billion).

Under the terms of the deal, Metro agreed to pay $C24.50 a share in cash and stock for Jean Coutu, the companies said in a joint statement.

Asset sales under consideration include unloading the 32.2 million shares Metro owns in Alimentation Couche-Tard, owner of the Circle K convenience-store chain, Bloomberg reported.

"We're not under pressure, there's no critical timing, we will do this in an orderly fashion to make sure we maximize proceeds," Metro chief financial officer Francois Thibault said on a conference call, commenting on Couche-Tard, according to Bloomberg.

The company forecasts a debt to earnings ratio below 3 if it sells its entire stake in Couche-Tard, Bloomberg reported, citing Mr Thibault. The goal is to decrease the ratio to 2.5% over the next couple of years, he said.

Shares of Metro traded 1.4% weaker in Toronto, while those of Jean Coutu Group were 1.7% stronger at $C24.70.

In Europe, the Stoxx 600 Index rose 0.3%. France's CAC 40 Index rose 0.4%, Germany's DAX Index increased 0.6% and the UK's FTSE 100 Index climbed 0.9%.

(BusinessDesk)