Dow, S&P 500 post gains to start May as investors focus on supply chain bottlenecks

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Stocks closed mostly higher on Monday, just shy of records, despite weaker-than-expected manufacturing data that clouded some of the optimism surrounding the recovery of US corporations from the COVID pandemic. The Dow Jones Industrial Average DJIA, + 0.70% advanced 238.38 points, or 0.7%, ending at 34,113.23, its third-highest close in history. S&P 500 SPX, + 0.27% added 11.49 points, or 0.3%, to close at 4,192.66, its second-highest result in its history. The Nasdaq Composite COMP, -0.48% fell 67.56 points, or 0.5%, ending at 13,895.12, extending its losing streak to 2 days. On Friday, the Dow posted a 0.5% weekly decline, but posted a 2.4% rise in April, while the S&P 500 was largely unchanged, but gained 5.6% last month. The Nasdaq Composite posted a weekly loss of 0.4%, but jumped 7% in April.

Read: Charlie Munger ‘hates’ the rise of bitcoin: ‘disgusting and contrary to the interests of civilization’ What drove the market? US stocks mostly ended higher to start May, despite some economic data suggesting “crazy” prices and rampant shortages of parts, materials and labor could threaten the rebound in manufacturing. The Institute for Supply Management’s manufacturing index fell to 60.7% in April from a 38-year high of 64.7% in the previous month. However, any number above 50 marks an increase in factory activity, the April reading did not meet analysts’ expectations of a reading of 65%. “If that rhythm [of manufacturing activity] remains to be seen, ”said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Even a well-positioned and anxious consumer sector could cool down as price increases accelerate, and the potential for supply chain disruptions to further slow production could further reduce sales.” Even with continued supply chain disruptions, investors remain focused on a bright outlook for US corporations despite the COVID pandemic, with some of the larger companies claiming a genuine rebound is taking place. The revival was shown, at least partially, as conglomerate Berkshire Hathaway BRK.A, + 1.82% BRK.B, + 1.54% reported a 20% increase in its operating profit, rising to $ 7.02 billion from $ 5.87 billion in the previous year. Berkshire, led by billionaire investor Warren Buffett, over the weekend also reported first-quarter net income of $ 11.7 billion, compared to a loss of $ 49.7 billion in the same period last year. . See: Berkshire’s Munger: Share Buybacks for Shareholders’ Benefit, a ‘Deeply Moral’ Act Berkshire’s performance helped bolster confidence in equities to kick off May, traditionally a month associated with the start of a seasonal trading leg comparatively weak six-month-old. “Overall, first-quarter earnings performance is shaping up to be one of the largest earnings incorporated into earnings since the tailwind of the Tax Cuts and Jobs Act of 2017,” wrote an investment strategy team from Glenmede, in a Monday note. “Overall, positive earnings growth is expected to continue into the later stages of 2021, as we move toward a version of economic normalcy.” Of the S&P 500 companies that have reported results so far, 87.1% beat earnings estimates, according to Refinitiv, a figure that would be the highest on record since 1994, when it began tracking the data. Investors also saw positive developments in Europe, reinforcing confidence in the eurozone recovery. The European Commission on Monday proposed allowing non-essential travelers who have been fully vaccinated into the region. In the US, Fed Chairman Jerome Powell said the US economic outlook has “clearly improved” but also noted that the recovery has been uneven, exacerbating long-standing disparities, in a talk at the Fair Economy conference. Read: Powell publishes new Fed data showing how the pandemic hit the poorest the hardest. The anxieties surrounding the Fed’s response to a stronger economy have kept investors on edge. New York Fed Chairman John Williams said Monday that he expects inflation to top 2% for the rest of the year, but to decline after the economy has recovered. Dallas Fed Chairman Robert Kaplan said on Friday that he thinks it is time to discuss reducing the Fed’s asset purchases. Bernard Baumohl, global chief economist at The Economic Outlook Group, recently wrote that the Fed will have to walk a fine line as interest rates finally hike and cut back on an asset purchase program that has helped support markets during the height of the pandemic. March inspired stock sale. “So what should the Fed do at this stage? Frankly, nothing important at the moment. But as the economy regains its equilibrium, Powell will face a really nagging problem later this year: How to reduce asset purchases without causing major bond market turmoil? ”. Baumohl wrote. The Treasury Department said Monday that it expects to increase its borrowing to $ 463 in the April-June quarter, which is $ 368 billion more than previously estimated. Clorox Co. CLX shares, -1.02% closed down 1% after its fiscal third quarter sales fell short of expectations. The company also went to a net loss from a gain a year ago, as a result of an impairment charge of $ 329 million, or $ 2.11 per share. Berkshire’s Class B stock BRK.B + 1.54% rose 1.6% after Buffett said Greg Abel, the conglomerate’s vice president in charge of non-insurance operations, would be his successor. as CEO if Buffett left the position. Shares of Tesla Inc. TSLA, -3.46% fell 3.5% after a German trade magazine reported that Tesla’s gigafactory in Berlin is likely six months behind schedule. Shares of Verizon Communications Inc. VZ, + 0.22% rose 0.2% after it announced that it would sell Verizon Media, including its Yahoo and AOL brands, for $ 5 billion to private equity firm Apollo Global Management Inc. APO, – 0.54%. Domino’s Pizza Inc. DPZ, + 2.66% said in a Monday filing that it has entered into a $ 1 billion accelerated share buyback agreement with Barclays. Shares of GameStop Corp. GME, -6.56% fell 6.6%, after the video game and consumer electronics retailer announced that it effectively eliminated its long-term debt. Estée Lauder Companies EL shares, -7.93%, fell 7.9%, after the cosmetics and beauty company posted stronger-than-expected earnings for its fiscal third quarter, but sales that did not meet estimates. . How did other assets fare? Hong Kong’s Hang Seng HSI Index, -1.28% fell 1.3%. The Shanghai and Tokyo stock exchanges were closed. The Stoxx Europe 600 SXXP, + 0.58% posted a 0.6% gain. The yield on the 10-year Treasury note TMUBMUSD10Y, 1,603% fell 2.6 basis points to 1,606%, following weaker manufacturing data. The dollar was weaker, trading 0.4% lower according to the ICE DXY US dollar index, down -0.35%. GC00 gold futures prices, + 1.44% finished 1.4% higher to settle at $ 1,791.80 an ounce at Comex. US crude CL.1 futures, + 1.34% closed 1.4% higher to settle at $ 64.49 a barrel. Mark DeCambre contributed reporting