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Before The Bell - An early rally faded on Wall Street as some economic data provided mixed signals, and the major averages finished mostly flat as trading resumed following the long Memorial Day weekend. 

The Dow Jones Industrial Average initially jumped by more than 300 points.  But the big gains evaporated, partly on signs that parts shortages are crimping the ability of manufacturers to meet booming demand.

The Institute for Supply Management reported that its purchasing-managers index of manufacturing activity rose to strong 61.2 in May (a figure above 50.0 indicates expansion). The down side was that factories are having to endure record wait times for certain materials. The news reinforced a feeling of unevenness to the economic recovery. 

An attempt at a rally in the afternoon was helped by an intraday retreat in bond yields but again, the gains proved fleeting. At the session’s close, the Dow had tacked on a slim 46 points. But the S&P 500 lost a couple of points and the NASDAQ slipped 12 points.

The energy sector was the big winner on Tuesday, with oil prices rising $1.40 a barrel in New York trading, to $67.72. OPEC+ noted at its virtual meeting that the group is seeing clear signs of improving demand. Leading oil producer Saudi Arabia indicated that it would be rolling back previous production cutbacks incrementally. The comeback in demand was taken as a bullish sign, outweighing plans to boost supply.

Reinforcing the view that energy usage is perking up is the public’s embrace of travel again. The holiday weekend saw a strong uptick in airline passengers, and drivers took the roads in numbers where weather allowed.  

Overall, the major stock market indexes largely marked time on the first day of June. But the advance-decline lines on both the New York Stock Exchange and the NASDAQ were both nicely positive, suggesting firm underpinnings to the market.  

Investors may be waiting for clearer signs on the direction of the economy, inflation, and interest rates. Friday’s release of the monthly government employment report could provide important clues in that regard.   

The expectation is that employers added 650,000-700,000 nonfarm positions in May, up from a disappointing 266,000 jobs added in April.

A strong payroll number would show that the economy is on track, but it might also mean the Federal Reserve’s heavy-duty stimulus measures are no longer a necessity.

Stock futures are inching higher about a half hour before the opening bell.  - Robert Mitkowski   

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.