Gains in the shares of energy and financial firms lifted the Dow Jones Industrial Average higher on the first day of the third quarter.
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The blue-chip index jumped 189 points, or 0.9%, to 21538, on course for a fresh closing record. The S&P 500 rose 0.6% and the Nasdaq Composite edged down 0.2%.
U.S. stocks climbed to fresh highs in the first half of the year, propelled by strong corporate earnings and an improving global economic picture. Yet many investors and analysts expect stock gains to slow the rest of the year, citing recent weakness in inflation data, higher-than-average stock valuations and a recent slide in commodity prices.
The pace of earnings growth is also expected to moderate in the second quarter of 2017 after companies posted their best results in nearly six years.
"The big question for markets is now: Is this soft patch in the U.S. behind us?" said Michael Herzum, head of multiasset strategy at Union Investment, whose firm has taken a more cautious stance heading into the second half of the year. "We think the bulk of the earnings upgrades are now done," he said.
Stock gains were broad Monday, pushing 9 of 11 sectors in the S&P 500 higher. Dow component Chevron rose 2.3% and Exxon Mobil added 1.8%, while U.S. crude jumped 1.3% to $46.62, on course for its eighth consecutive session of gains.
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Financial shares climbed with government bond yields, sending Goldman Sachs Group and J.P. Morgan Chase up more than 2% apiece. The yield on the 10-year U.S. Treasury note rose to 2.345%, according to Tradeweb, from 2.298% on Friday. Higher rates typically support banks' net-interest margins, a key measure of lending profitability.
Bond yields have risen sharply in recent sessions on growing expectations that global central banks, including the European Central Bank and the Bank of England, could move away from ultra-accomodative monetary policy.
"Our perspective is we're going to have pretty modest growth and modest inflation" in the second half of the year, said Greg Woodard, who directs portfolio strategies at Manning & Napier. "We see rates grinding a bit higher but [monetary] conditions are going to remain fairly accommodative around the world," Mr. Woodard said.
A flurry of manufacturing readings added to confidence in the health of the world economy, lifting stocks and government bond yields.
U.S. Treasurys extended losses after the Institute for Supply Management said U.S. factory activity picked up in June. Earlier, data also showed eurozone factories posting their busiest month in more than six years in June, and signs of momentum in Japan and China.
The Stoxx Europe 600 rose 1.1%, on track to snap a four-session losing streak. Shares of banks, energy companies and miners led gains in Europe, which typically indicates confidence in the strength of the global economy and the outlook for commodities.
As investors favored risk assets, gold fell 1.2% to $1,227.10 an ounce, around its lowest since May, while the dollar rose 0.6% against the yen.
Earlier, stocks in Asia mostly inched higher. Hong Kong's Hang Seng added 0.1% after its best first-half performance since 2009, while Japan's Nikkei Stock Average was also 0.1% higher as a central bank survey showed business confidence among the nation's large manufacturers strengthened to its highest level in more than three years in the second quarter.
The Shanghai Composite inched up 0.1% after a private gauge of China's factory activity rebounded in June to show an expansion.
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(END) Dow Jones Newswires
July 03, 2017 11:35 ET (15:35 GMT)