Stocks Bounce Back After ISM Report

Stocks rebounded from a lower start Tuesday after the ISM reported manufacturing moved into expansion mode for the first time since January 2008.

The Institute for Supply Management reported its manufacturing index rose to 52.9in August from 48.9 in July. Any reading over 50 indicates expansion.

Among the morning's other economic news, pending-home sales jumped 3.2 percent in July to its highest level since June 2007. It was the sixth straight increase and better than the 2-percent rise economists had expected.

And construction spending slipped 0.2 percent in July, worse than the flat reading economists had expected. This came after a 0.1-percent uptick in June.

As the calendar flips to September, investors will look back on August fondly, the last two trading sessions notwithstanding.

August marked the sixth consecutive month of gainsfor both the S&P 500 and the Nasdaq, and the fifth positive month for the Dow out of six. The Dow and the S&P 500 had their best Augusts in nine years, and the S&P has now gained almost 39 percent over the past six months.

EBay shares rose after the company confirmed that it has agreed to sell its Skype Internet-calling service for $2.75 billion to an investor group led by Silver Lake. EBay will get $1.9 billion in cash and retain a 35-percent stake in the company.

Yahoo shares were flat following news that investor Carl Icahn cuts his stake in the company to 4.48 percent from 5.45 percent.

Battered commercial mortgage lender CIT Group was in the spotlight once again after the company said it would fail to make a Sept. 15 interest payment on notes due in 2067.

The air also continued to come out of the meteoric rally in AIG shares, which more than tripled in August.

Bank of America rose after the bank said it wants to repay part of its government bailout.

And auto makers will be in focus today as August sales trickle in. The industry is expected to show its first year over year gain in nearly two years, thanks in large measure to the Cash For Clunkers program.

Ford shares rose ahead of its report. Barclays expects Ford sales to be up 53 percent from a year earlier.

- Peter Schacknow contributed to this report.