Stocks Mixed and Near Flatline Amid Dueling Sectors…..

U.S. equities finished mixed and near the flatline after returning to action following the long holiday weekend. Strong global economic data, highlighted by a pair of robust U.S. manufacturing reports, preserved optimism of economic recoveries and gave the Energy, Industrials and Materials sectors a boost. However, the data put some pressure on Treasuries, in turn lifting yields, to the benefit of the Financials sector but to the detriment of growth-related stocks, notably Information Technology issues, and kept a lid on any gains. A reduced outlook from Abbott Laboratories may also have added pressure to the Health Care sector. In M&A news, Canada’s Pembina Pipeline Corporation announced an agreement to acquire Inter Pipeline valued at about $8.3 billion. In other economic news, construction spending and regional manufacturing activity in Dallas both missed expectations. Meanwhile, gold came under pressure, the U.S. dollar added to yesterday’s drop, and crude oil prices rose as OPEC and its allies, known as OPEC+, held a meeting and maintained its previous plans for production cuts. Europe finished with widespread gains, while markets in Asia were mixed.

The Dow Jones Industrial Average rose 46 points (0.1%) to 34,575, while the S&P 500 Index shed 2 points (0.1%) to 4,202 and the Nasdaq Composite decreased 12 points (0.1%) to 13,736. In heavy volume, 1.0 billion shares were traded on the NYSE and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil gained $1.40 to $67.72 per barrel. Elsewhere, the Bloomberg gold spot price declined $7.14 to $1,899.73 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.2% lower to 89.89.

May manufacturing activity remains robust as final month of Q2 commences…..

The May Institute for Supply Management (ISM) Manufacturing Index showed solid manufacturing growth (a reading above 50) accelerated slightly more than expected. The index rose to 61.2 from April’s unrevised 60.7 level, and versus the Bloomberg consensus estimate of a modest rise to 61.0. This index moved further into solid expansion territory as growth in new orders continued to accelerate, along with backlog of orders and new export orders. Production growth decelerated but remained comfortably in expansion territory and employment decreased but continued to expand modestly. Prices declined but remained noticeably elevated, dipping to 88.0 from 89.6.

The ISM said, “Manufacturing performed well for the 12th straight month, with demand, consumption and inputs registering strong growth compared to April. Panelists companies and their supply chains continue to struggle to respond to strong demand due to the difficulty in hiring and retaining direct labor. Record backlog, customer inventories and raw material lead times are being reported. The manufacturing recovery has transitioned from first addressing demand headwinds, to now overcoming labor obstacles across the entire value chain.”

The final May Markit U.S. Manufacturing PMI Index was unexpectedly revised higher to 62.1 from the preliminary level of 61.5, where it was forecasted to remain, and above April’s 60.5 level. A reading above 50 denotes expansion and this was the highest on record as Markit noted that the upturn was supported by stronger expansions in output and new orders, with the pace of the latter reaching the fastest on record. Nonetheless, the report added that constraints on production capacity were exacerbated further during the month, as severe supply-chain disruptions led to a marked accumulation of backlogs of work and one of the fastest rises in input prices since data collection began in May 2007.

Construction spending rose 0.2% month-over-month (m/m) in April, versus projections of a 0.5% gain, and following March’s upwardly-revised 1.0% increase. Residential spending rose 1.0% m/m but non-residential spending declined 0.5%.

The May Dallas Fed Manufacturing Index declined more than expected but remained solidly in expansion territory (a reading above zero). The index decreased to 34.9 from 37.3 in April and compared to forecasts of a decline to 36.3.

Treasuries were lower, as the rate on the 2-year note was little changed at 0.15%, while the yields on the 10-year note and the 30-year bond rose 2 basis points to 1.61% and 2.30%, respectively.

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