Stocks Start Week With Modest Gains
June 01 2020 - 11:49AM
Dow Jones News
By Alexander Osipovich, Anna Isaac and Xie Yu
Stocks posted small gains 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 ticked up 55 points, or 0.2%,
in midday trading, bouncing back after losing more than 100 points
just after the opening bell.
The S&P 500 was up 0.2%, while the Nasdaq Composite gained
0.4%. 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."
Drugmaker Pfizer fell 8.1%, weighing on the Dow. The drugmaker
said late Friday that it would stop a study of a potential breast
cancer treatment.
In bond markets, the yield on the 10-year U.S. Treasury ticked
up to 0.674%, 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.
Write to Alexander Osipovich at
alexander.osipovich@dowjones.com, Anna Isaac at anna.isaac@wsj.com
and Xie Yu at Yu.Xie@wsj.com
(END) Dow Jones Newswires
June 01, 2020 12:34 ET (16:34 GMT)
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