Stock Market Rallies on Benign Economic Data, Investors Remain Cautious

Strategic Insights -

The US stock market began the month of June with a strong rally, driven by favorable economic data, but investors are wary of the historically weak month for stocks. The Dow Jones industrial average and other major indexes rose over 2% on Monday, with the Standard & Poor's 500 index and Nasdaq composite reaching their highest levels this year. The data suggested a moderation in the economy's decline but not yet a rebound. Personal spending was down slightly in April, personal incomes were flat, and US manufacturing activity contracted for the 16th straight month in May, although at a slower pace. The market's resilience was also attributed to technical factors, including a surge of new money from mutual funds and the S&P breaking through its 200-day moving average.

Key Takeaways:

  • The Dow Jones industrial average and other major indexes rose over 2% on Monday, with the Standard & Poor's 500 index and Nasdaq composite reaching their highest levels this year.
  • Personal spending was down slightly in April, personal incomes were flat, and US manufacturing activity contracted for the 16th straight month in May, although at a slower pace.
  • The market's resilience was attributed to technical factors, including a surge of new money from mutual funds and the S&P breaking through its 200-day moving average.
  • General Motors Corp.'s bankruptcy filing served as a reminder of the government's heavy involvement in corporate America following last year's market crash and economic tumble.
  • A number of analysts remain skeptical about the market's rally, citing concerns about interest rates and the potential for an economic recovery.
  • According to Shaeffer's Investment Research analyst Todd Salamone, June's average return during the past 20 years is negative 0.5 percent.

Statistics:

  • The Dow Jones industrial average rose 221.11, or 2.6 percent, to 8,721.44.
  • The Standard & Poor's 500 index rose 23.73, or 2.6 percent, to 942.87.
  • The Nasdaq composite index rose 54.35, or 3.1 percent, to 1,828.68.
  • The US economy's decline is moderating, but not yet showing a rebound.
  • US manufacturing activity contracted for the 16th straight month in May, although at a slower pace.
  • Personal spending was down slightly in April, and personal incomes were flat.
  • The S&P broke through its 200-day moving average, a key technical development that hasn't occurred in over a year.

Sources:

  • The Associated Press
  • Dow Jones industrial average
  • Standard & Poor's 500 index
  • Nasdaq composite index
  • Fort Pitt Capital Group
  • Shaeffer's Investment Research
  • Standard & Poor's