Midday Market Update: Stocks Rise Monday as Economic Data Outweighs Trade Tensions

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Stocks rose by midday Monday, shaking off potential headwinds, as encouraging economic data hit the wires. 

All three major U.S. indices rose after having fallen in the morning. The S&P 500 rose 0.35%, with the 10 Year Treasury held up to 0.67%. Yields rise when prices fall. 

The Institute for Supply Chain Management said manufacturing activity contracted in May, with a reading of 43.1, worse than the expected 44 (below 50 is contractionary), but better than April’s reading of 41.5. This supports investors’ view that the recent economic data, still showing that output is contracting year-over-year, is improving and moving back in the direction of positive growth. 

Also, construction spending for April came in at -2.9%, better than the expected -6.8%. Construction company Lennar Homes  (LEN) - Get Report outperformed, rising as much as 0.7%. 

Consumer discretionary and bank stocks also outperformed Monday, another risk-on signal. 

The market shook off trade tensions with China, as the country canceled imports of U.S. soybeans, which isn’t material to the U.S. economy, but does indicate the direction of U.S.-China trade relations is negative. This has weighed on market sentiment, although investors have focused primarily on the speed of an economic recovery from the virus. 

The riots across major cities such as New York, Los Angeles and Chicago in response to the tragic death of George Floyd, may soon cause some concern among investors, but isn’t Monday as of midday. 

“If the riots continue or get worse in the days ahead, that could start to have in impact on consumer confidence and raise uncertainty about the rate of recovery in the economy as we head into the summer months,” Michael Sheldon, chief investment officer of RDM Financial Group told TheStreet. "I think it’s too early to say that what’s going on in the world in terms of the riots and uncertainty caused by recent events is likely to derail the economic recovery over the next 12 to 24 months.” 

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