Stocks Close Modestly Higher Following Lackluster Trading Day - U.S. Commentary

(RTTNews) - After showing a lack of direction throughout much of morning trading on Monday, stocks moved mostly higher in the afternoon. Buying interest remained relatively subdued, however, limiting the upside for the markets.

The major averages pulled back well off their best levels going into the close but managed to end the day modestly higher. The Dow edged up 29.69 points or 0.2 percent to 18,040.37, the Nasdaq rose 12.90 points or 0.3 percent to 5,082.93 and the S&P 500 crept up 4.34 points or 0.2 percent to 2,111.73.

Traders initially seemed reluctant to make any significant moves following the release of a slew of U.S. economic data.

A Commerce Department report released before the start of trading showed a slightly bigger than expected increase in personal income in April, although the report also showed that personal spending was unexpectedly flat.

The report said personal income rose by 0.4 percent in April after coming in unchanged in March. Economists had expected income to climb by 0.3 percent.

Meanwhile, the Commerce Department said personal spending came in unchanged in April following an upwardly revised 0.5 percent increase in March. Spending had been expected to edge up by 0.2 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The April income and spending figures are another reminder that even though their incomes are rising at a healthy pace, households are still reluctant to boost spending more freely."

The Institute for Supply Management also released a report showing that its index of manufacturing activity rose by more than expected in May.

The ISM said its purchasing managers index climbed to 52.8 in May from 51.5 in April, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to inch up to 51.8.

Additionally, the Commerce Department released a separate report showing that construction spending jumped to a six-year high in April.

While traders eventually looked to pick up stocks in afternoon trading, buying interest remained subdued ahead of the release of the more closely watched monthly jobs report on Friday.

Sector News

The higher close by the broader markets was partly due to considerable strength that emerged among transportation stocks.

Reflecting the strength in the transportation sector, the Dow Jones Transportation Average advanced 1.1 percent, bouncing off a seven-month closing low.

Airline stocks helped to lead the way higher, resulting in a 1.5 percent gain by the NYSE Arca Airline Index. Industry giants American Airlines (AAL), Delta (DAL), and United Continental (UAL) turned in some of the best performances.

Notable strength was also visible among commercial real estate stocks, as reflected by the 1.2 percent gain posted by the Morgan Stanley REIT Index.

While most of the other major sectors showed more modest moves, some weakness was visible among gold, steel, and oil service stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday. Japan's Nikkei 2225 Index closed just above the unchanged line and Hong Kong's Hang Seng Index rose by 0.6 percent, while Australia's All Ordinaries Index fell by 0.7 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index rose by 0.4 percent and the German DAX Index edged up by 0.2 percent.

In the bond market, treasuries showed a notable move to the downside on the heels of today's economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 9.7 basis points to 2.192 percent.

Looking Ahead

While a report on factory orders may attract some attention on Tuesday, traders may be reluctant to make significant moves ahead of the release of more closely watched reports in the coming days.