NEW YORK (AP) - The fear that has been hanging over markets for most of August lifted on Wednesday. For how long remains anyone's guess.
The stock market started September with a jolt, turning sharply higher after a pair of encouraging reports on manufacturing sent investors seeking out riskier investments. Prices for the safest assets - Treasurys, gold and the dollar - all fell.
With investors suddenly willing to embrace risk, the Dow Jones industrial average added 255 points, its best day since July 7. All 30 stocks in the Dow closed higher. That marked a sharp break from August, when the market's most widely used index turned in its worst performance for the month in nine years.
Reports of stronger-than-expected manufacturing growth in China and the U.S snapped a run of discouraging data on the economy, including dismal readings on home sales and economic output. The Institute for Supply Management said manufacturing activity in the U.S. rose in August, in contrast to regional reports from recent weeks that pointed to a slowdown.
"It gives us hope that things may not be as bad as they seem," said Zahid Siddique, an associate portfolio manager at Gabelli Equity Trust Inc.
The Dow gained 254.75 points, or 2.5, percent to close at 10,269.47. Industrial stocks such as General Electric Co. and Caterpillar Inc. were among the Dow's biggest gainers.
Analysts cautioned that the gains, like many others the market has seen in recent weeks, could quickly pass. A bad surprise from the Labor Department's monthly report on employment, due out Friday, could investors back into hiding.
The good news on manufacturing "gives some comfort, but that is only good until the next number," said Darell Krasnoff, managing director at Bel Air Investment Advisors.
Even with its gains Wednesday, the Dow is still 989 points below its high this year of 11,258 reached on April 26. Nearly half of those losses, or 451 points, came in August as the market was bombarded with bad news on the economy.
Daniel Penrod, senior industry analyst at the California Credit Union League, said manufacturing reports have become increasingly important because they are a leading indicator for whether companies might start adding new jobs.
"If manufacturers ramp up ... it's going to require hiring," Penrod said. "Getting closer to that threshold (of hiring) is vital to the economy."
The Standard & Poor's 500 index rose 30.96, or 3 percent, to 1,080.29. The S&P 500 lost 4.7 percent in August, its worst showing for the month since 2001, when the dot-com bubble was imploding. The Nasdaq gained 62.81, or 3 percent, to 2,176.84.
About six stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 4.5 billion shares.
Safety assets fell broadly. Gold slipped $2.20 to settle at $1,248.10 an ounce. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.58 percent from 2.47 percent late Tuesday. The yield on government debt anchors borrowing rates for a wide variety of consumer and business loans.
In corporate news, Burger King Holdings Inc. jumped $2.41, or 14.7 percent, to $18.86 on reports it could be taken private. Apple Inc. shares rose $7.23, or 3 percent, to $250.33 after CEO Steve Jobs announced a new line of iPods.
GE rose 53 cents, or 3.7 percent, to $15.01. Eaton Corp. climbed $5.38, or 7.7 percent, to $74.86.
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AP Business Writer Matthew Craft contributed to this story.