Stocks chopped around the unchanged line on Monday before finishing with modest gains as the bulls and bears continue their epic multimonth Dow Jones Industrial Average slugfest near the 18,000 level — a threshold first crossed back in December.
It’s likely that Wall Street is going to trade like this until the employment situation report is released on Friday, giving insight into the pace and timing of the Federal Reserve’s likely interest-rate hikes later this year. (This is the one and only thing that seems to move the market anymore.)
Until then, it’s probably going to be more of the same.
In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.3% and the Russell 2000 gained 0.3%.
Transportation stocks led the way thanks to gains among the airlines after Bloomberg carried comments from the CEO of Southwest (LUV) that seating capacity growth would be capped at 7%. Excess capacity growth concern hit stocks in the industry hard a couple of weeks ago. Telecoms and energy stocks were the laggards.
Treasury bonds were weaker as the 10-year yield increased to 2.2%. The dollar was stronger against its major peers. Gold lost 0.1%.
It’s not just stocks that are in the doldrums, but crude oil as well as West Texas Intermediate finished essentially unchanged closing just above the $60 per barrel level that it’s been holding near since late April. Traders are waiting on the announcement from the upcoming OPEC meeting later this week. With U.S. shale oil producers ramping up activity after energy prices rebounded from their lows earlier in the year, the oil cartel looks eager for another price decline in an effort to recapture market share.
The situation in Greece remains a wildcard heading into that June 5 deadline for the $1.8 billion debt payment to the IMF, but after years of confrontations, elections and passed deadlines, traders are basically ignoring the situation in Athens.
There was some good news on the economic front. The ISM manufacturing index improved to 52.8 in May from nearly a two-year low of 51.5 in April (any reading over 50 indicates month-over-month growth). The consensus was looking for a 52 result. New orders increased to their best level since December while employment returned to growth.
New data on personal consumption expenditures suggests that caution is still in play, with personal income up 0.4% on a monthly basis in April — just ahead of consensus on dividends and rental incomes. Wages remain a little soft. As a result, the savings rate increased to 5.6% from 5.2% in March.
Headline PCE inflation rose at its slowest rate since October 2009; core PCE, the Fed’s preferred measure, rose at a 1.2% annual rate, down from the 1.3% rate that’s prevailed since December and well below their 2% target.
While U.S. stocks are in stasis, there is tradable action happening overseas.
Despite a 4.7% gain on the Shanghai Composite overnight, emerging market stocks have been weakening with the iShares MSCI Emerging Markets ETF (EEM) down 0.4% to cross below its 200-day moving average for the first time since early April. That’s boosting the ProShares Short Emerging Markets (EUM) recommended to Edge subscribers on Thursday.