Before The Bell
Stocks started the first week of June on an up note, with solid gains in Asia kicking off the day’s trading, and the European bourses followed suit. On our shores, stocks opened lower, but spent the rest of the session in positive territory.
Investors appear to be gaining confidence that the worst of the economic downturn may be over, however we’re far from being out of the woods just yet. On point, the Institute for Supply Management reported that its manufacturing index rose to 43.1% in May, versus a reading of 41.5% in April which marked an 11-year low. (Readings above 50% indicate expansion, while those below 50 denote contraction.) Meanwhile, the Commerce Department reported that construction spending for April was down 2.9%, which was only half as bad as the market was expecting. Meanwhile, relations between the U.S. and China continued to show signs of strain, after China asked state-run agricultural companies to halt buying certain farm goods from the U.S, such as soybeans and Pork.
The Dow Jones Industrials ended the session up 91 points, or 0.4%, the broader S&P 500 advanced 11 points (0.4%) while the tech-heavy NASDAQ led the pack with a 62 point gain (0.7%). Nearly all of the major market sectors were firmly in the green, led by energy (+1.6%), basic materials (1.5%), and consumer cyclicals (1.4%). Healthcare stocks were the only group in negative territory, losing half a percentage point. Altogether, advancing issues outpaced decliners by a better than three-to-one margin.
Elsewhere oil prices ended flat, with light sweet crude at about $35.50 a barrel. Reports that OPEC and its partners would consider extending the supply cuts that went into effect in May helped lift prices from an early session drop. The commodity has bounced back more than 80% over the past 30 days, but it is still off about 33% from where it was a year earlier.
As we look to the new day, it appears that the global equity rally will continue. Stocks in Asian markets had another positive session, and the European bourses are showing strong gains. Meanwhile, U.S. stock futures are suggesting the major indexes will open to the upside, while crude oil is up about 2%. During the day, some automobile manufacturers will be reporting sales figures for May which, although down year over year, should show some sequential improvement. For tomorrow, the Institute for Supply Management is scheduled to report its nonmanufacturing index for May, which should also be up from April’s reading.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
