Exchange traded funds (ETFs) and the broader markets are having a positive reaction to good readings on manufacturing and construction spending this morning.

A private sector measure of U.S. manufacturing activity declined last month at the slowest pace since August, while production jumped to its highest level in more than two years.  The Institute for Supply Chain Management said that its manufacturing index read 48.9, up from 44.8 in June and better than the 46.2 anticipated by analysts.  Additionally, in July, new orders and production hit their highest levels since the summer of 2007 and new export orders jumped into growth territory after shrinking for nine months, states Tali Arbel of the Associated Press.

On a separate note, the Senate has come under much pressure to get the $2 billion extension of the cash for clunkers program finalized, since many believe that funds will run out this week.  Many feel that this is one program that is working and stimulating both the automotive industry as well as the economy.

The Commerce Department reported an unexpected increase in construction spending as residential building increased.  Construction spending increased by a seasonally adjusted annual rate of 0.3% in June, smashing analysts’ expectations of a 0.5% decline.  Despite this encouraging news, the PowerShares DB Building & Construction (PKB) dropped 0.5% in intraday trading.

The aforementioned reports indicating an increase in strength in manufacturing sent crude oil north of $70/barrel.  Optimistic investors are encouraged that the worst of the global economic recession seems to be behind us, setting the stage for surging demand. The US Oil Fund (USO) was up 3.3% in morning trading.

Overall the Dow Jones Industrial Average was up 1%, the S&P 500 added 1.1% and the Nasdaq gained 0.9% in morning trading.

For more stories on manufacturing, visit our manufacturing category.

Kevin Grewal contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.