Dow transports, Russell 2000 notch records in bullish sign
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U.S. stocks on Monday closed the first day of trading in July and the second half of 2017 in positive territory--though off the best levels--on the back of a rally in energy and financials, but tech shares lagged behind.
Gains accelerated in an abbreviated session ahead of the Fourth of July holiday on Tuesday, after an upbeat report on manufacturing.
Read:Which markets are closed for the Fourth of July? (http://www.marketwatch.com/story/july-4th-which-markets-are-closed-2017-06-30)
The Dow Jones Industrial Average climbed 129.64 points, or 0.6%, closing at 21,479.27, finishing well off its intraday record of 21,562.75. Blue chips were aided in part by a rally in shares of Walt Disney Co. (DIS), on speculation that the entertainment giant might strike a deal (http://www.marketwatch.com/story/disney-shares-up-almost-2-on-report-verizon-is-eyeing-deal-2017-07-03) with Verizon Communications Inc.(VZ).
Sharp advances in Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. (JPM), and Chevron Corp. (CVX), were the main contributors to the Dow's Monday upswing.
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The S&P 500 index rose 5.61 points, or 0.2%, at 2,429.02, led by 2% gain in energy and a 1.3% rise in financial shares, but limited by a 0.9% slump in tech.
Meanwhile, the Dow Jones Transportation Average closed at a record at 9.639.63, marking the indicator's first all-time high since March 1. The small-cap Russell 2000 index also notched a record close at 1,426.68. Some market watchers consider records in the transports benchmark and the Dow industrials at the same time, along with records in small-cap shares, as a bullish sign of Wall Street health.
Lagging behind the benchmarks, however, was the Nasdaq Composite Index , down 30.36 points, or 0.5%, to end at 6,110.06. The tech sector has been among the more volatile segments of the market after a number of popular stocks, including Amazon.com Inc. (AMZN) in early June, hit records, raising concerns that valuations were getting rich.
"I think what we have here is an environment that is reasonably good," said John Manley, chief equity strategist at Wells Fargo Funds Management. Manley said the investment atmosphere continues to be a good one and that earnings may further bolster confidence, if results are better than expected.
"The environment is not a bad environment and I look around and say valuations are high but they are kind of on the low end of high, but if nothing unexpectedly bad happens, it probably is not going to matter," said Manley.
David O'Malley CEO of Penn Mutual Asset Management also maintains a bullish outlook. He said recent reflation in bonds, with the 10-year Treasury offering a yield of 2.34%, compared with 2.22% at the same time last week, is helping the overall market because higher yields are a positive to financials, which are the linchpin to economic health. "If the banks start outperforming that could really deliver a lift to the market," he said.
The New York Stock Exchange ended trading at 1 p.m. Eastern on Monday, while government-bond markets wrapped up at 2 p.m., ahead of the Fourth of July holiday on Tuesday.
See:Stock market poised to kick off July 4 week with fireworks of its own (http://www.marketwatch.com/story/stock-market-poised-to-kick-off-july-4th-week-with-fireworks-of-its-own-2017-06-30)
On Friday, the S&P 500 and Dow closed modestly higher as the second quarter came to an close (http://www.marketwatch.com/story/us-stock-futures-point-to-a-comeback-from-tech-led-battering-2017-06-30), while the tech-laden Nasdaq finished slightly lower for the session. The S&P and Dow have advanced for seven straight quarters, while the Nasdaq has gained for four quarters in a row.
Economic news: On the data front, ISM's manufacturing index rose to 57.8 in June (http://www.marketwatch.com/story/disney-shares-up-almost-2-on-report-verizon-is-eyeing-deal-2017-07-03), compared with 54.9 in the prior month, marking its highest level since 2014. A reading of 50 indicates expansion. A separate report from IHS Markit showed manufacturing PMI falling to 52.0 in June from 52.7. Economists polled by MarketWatch had expected a reading of 55.5% for the ISM gauge.
Meanwhile, May construction spending was flat (http://www.marketwatch.com/story/construction-spending-zigzags-higher-commerce-says-2017-07-03), compared with a reading for April that was lifted by the Commerce Department.
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
Other markets:Oil futures (http://www.marketwatch.com/story/oil-gains-aiming-for-eight-winning-sessions-in-a-row-2017-07-03) traded higher, as crude booked its eighth positive session in a row--marking its longest streak in seven years. European stocks gained, while Asian equity markets closed mixed (http://www.marketwatch.com/story/asian-markets-mixed-as-china-hong-kong-bond-trading-link-opens-2017-07-02). Gold futures pulled back, and a key dollar index advanced.
Stocks to Watch: Shares in Tesla Inc.(TSLA) slipped 2.5% after Elon Musk, the company's CEO, said production for its Model 3 electric car should start this Friday (http://www.marketwatch.com/story/teslas-model-3-to-begin-production-on-friday-elon-musk-2017-07-03). The $35,000 vehicle has "passed all regulatory requirements for production two weeks ahead of schedule," Musk said on Twitter.
Shares of EQT Corp. (EQT) rose 2% in early trade after The Wall Street Journal reported that activist investor Jana Partners took a 5.8% stake in the energy-and-production company.
(END) Dow Jones Newswires
July 03, 2017 13:39 ET (17:39 GMT)