The Dow Jones Industrial Average and the S&P 500 closed at record highs for the fifth time in a row after trading lower for most of the session on weak data from China and a disappointing measure of manufacturing in New York.
The Dow finished up 110 points, or 0.31%, to 35,625, while the S&P 500 gained 0.26%. The tech-heavy Nasdaq ticked down 0.2%.
Weaker-than-expected industrial-output and retail-sales data from China suggested the world's second-largest economy has been struggling to maintain its growth momentum as COVID cases rise and global supply chains remain disrupted.
The New York Federal Reserve's index of manufacturing business activity in the state fell more than expected in August after jumping the previous month to record highs.
Sentiment also was hurt by uneasiness over the Taliban rapidly taking control of Afghanistan. The U.S. withdrew forces from the country after 20 years.
The yield on the benchmark 10-year Treasury fell Monday to 1.255%.
The Dow and the S&P 500 both closed at records for a fourth session on Friday as Wall Street looked beyond falling U.S. consumer sentiment in July. For the week, the Dow rose 0.9% and the S&P 500 added 0.7%. The Nasdaq fell less than 0.1% last week.
The largest drop in sentiment since April 2020, however, also raised investors' concern about the economic recovery. It heightened the anticipation for an appearance by Federal Reserve Chairman Jerome Powell at a town hall on Tuesday and the release of minutes from the latest Fed meeting on Wednesday.
Several Fed officials lately have discussed just when the central bank might begin its tapering of bond purchases. The Fed has been buying $120 billion a month in Treasury, agency and mortgage bonds to keep interest rates low and support the economy during the pandemic.
The central bank has said it expects to keep rates near zero until the labor market reaches "maximum employment" and inflation runs above its 2% target. A strong consumer inflation report last week plus other solid economic data have added to the speculation on when the Fed might begin pulling back on economic support.
Federal Reserve Bank of Minneapolis President Neel Kashkari said a "few more" strong jobs reports would be needed before the Fed begins tapering asset purchases.
“If we see a few more jobs reports like the one we just got, then I would feel comfortable saying, yeah, we are - maybe haven’t completely filled the hole that we’ve been in - but we’ve made a lot of progress, and now, then will be the time to start tapering our asset purchases,” Kashkari said on a Bloomberg podcast recorded last week.
The Wall Street Journal reported Monday that Fed officials were nearing agreement on a timetable that would see the central bank begin scaling back on asset purchases if the economic recovery continues.
Meanwhile, Wall Street will have to navigate a series of top-tier retail earnings this week, including reports from Walmart (WMT) - Get Walmart Inc. Report, Target (TGT) - Get Target Corporation Report, Home Depot (HD) - Get Home Depot, Inc. (HD) Report and Lowe's (LOW) - Get Lowe's Companies, Inc. (LOW) Report, as well as retail sales data for July, in order to gauge consumer strength as COVID-19 cases continue to rise and plans to return to regular office work are pushed back further into the year.
"It’s undeniable that there are concerns looming that could spook some investors - delta, weak growth abroad, and conflict in Afghanistan. And with retail sales and big box stores set to report earnings, we could gain some insight into the consumer this week," said Chris Larkin, managing director of trading at E-Trade.
"So while there’s no shortage of factors that could be weighing on traders, keep in mind short-term volatility is par for the course when the market continues to notch record highs."