Stocks Start Week With Modest Gains
02 June 2020 - 4:48AM
Dow Jones News
By Alexander Osipovich and Anna Isaac
Stocks rose Monday as investors embraced signs that global
factory activity was on a path toward recovery and largely shrugged
off the violent clashes in U.S. cities.
The Dow Jones Industrial Average climbed 100 points, or 0.4%, in
afternoon trading. The S&P 500 was up 0.5%, while the Nasdaq
Composite gained 0.7%. Overseas, major European and Asian indexes
posted gains.
Data from surveys of purchasing manufacturers indicated that
factories in the U.S. and abroad continued to reduce output last
month, but the pace of deterioration slowed as governments eased
coronavirus-related restrictions. In China -- the first country to
impose sweeping lockdowns to combat the virus -- factories reported
an increase of activity, offering investors hope that other
countries would follow.
In the U.S., the Institute for Supply Management's manufacturing
index for May rose to 43.1 from an 11-year low of 41.5 in April. A
reading above 50.0 indicates an increase in activity, while a
reading below that level indicates a decrease.
"The hope is that what we've seen with China is playing out in
Europe, and there will eventually be follow-through in the U.S.
once the virus is under containment," said Jeffrey Kleintop, chief
global investment strategist at Charles Schwab.
Investors largely seemed to discount the clashes between police
and civilians in the U.S. as the worst civil unrest in decades
erupted in American cities this weekend.
"Markets are assuming it won't last. We've seen this all before,
going back to the civil protests in the 1960s," said Ian
Shepherdson, chief economist at Pantheon Macroeconomics. "If cities
go on to be closed down due to curfews and so on, then that would
be disastrous for companies trying to reopen. Too soon to
tell."
Ten of the 11 sectors of the S&P 500 were up on Monday, with
real estate, energy and financials among the best performers. Only
health care was negative.
Drugmaker Pfizer fell 6.8%, weighing on the Dow. The company
said late Friday that it would stop a study of a potential breast
cancer treatment. Another drugmaker, Gilead Sciences, slid 2.8%
after it reported mixed results from the latest trial of a Covid-19
treatment it is developing.
Shares of Target fell 2.2% after the Minneapolis-based retailer
closed or cut hours for more than 200 stores over the weekend due
to the unrest.
Gun stocks jumped as protests and violence dominated the
headlines. Smith & Wesson Brands soared 16%, while Sturm, Ruger
& Co. was up 9%.
In bond markets, the yield on the 10-year U.S. Treasury ticked
up to 0.671%, from 0.650% Friday.
Investors continued to monitor tensions between the U.S. and
China, which have feuded in recent weeks over Beijing's handling of
the coronavirus and its crackdown on Hong Kong. Bloomberg News
reported Monday that China has ordered companies to temporarily
halt imports of some U.S. farm goods including soybeans.
Such a move could add to the friction between the world's two
largest economies. A U.S.-China trade war roiled markets for much
of 2019 and ended only after both sides agreed to a Phase One trade
deal.
"If it is true China will buy less soybeans, it will increase
the chances of escalation with the U.S.," said Seema Shah, chief
strategist at Principal Global Investors. Such a move would suggest
that "China is predicting the upcoming U.S. election means that
President Trump's bark will be worse than his bite."
Mr. Trump blasted Beijing on Friday for "absolutely smothering
Hong Kong freedoms," but he stopped short of announcing specific
actions in response and he left the Phase One trade deal in place,
to the relief of investors. Hong Kong's benchmark stock index
surged 3.4% on Monday.
In Europe, the pan-continental Stoxx Europe 600 climbed 1.1%.
Shares of Associated British Foods, owner of clothing retailer
Primark, rallied 8% after it said it would be opening stores in
coming weeks in response to loosening government lockdowns.
Xie Yu contributed to this article.
Write to Alexander Osipovich at alexander.osipovich@dowjones.com
and Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
June 01, 2020 14:33 ET (18:33 GMT)
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