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Huge correction in economic report sends stocks higher

By: ken sweet The Associated Press
June 2, 2014 Updated: June 2, 2014 at 3:45 pm
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NEW YORK - Stocks closed mostly higher on a quiet Monday following two reports that showed the manufacturing industries of the world's two largest economies expanded last month.

Both the Dow Jones industrial average and the Standard & Poor's 500 index were able to set record highs for a second trading day in a row.

The Dow rose 26.46 points, or 0.2 percent, to 16,743.63. The S&P 500 rose 1.40 points, or 0.1 percent, to 1,924.97 and the Nasdaq composite fell 5.42 points, or 0.1 percent, to 4,237.20.

The Institute for Supply management said U.S. manufacturing grew at a brisk pace last month, correcting its earlier statement that growth had slowed. The ISM said the correct number for its manufacturing index was 55.4 in May, in line with what economists were expecting. That's a better result than the 53.2 figure that ISM initially reported.

The ISM manufacturing report is one of two closely watched reports each month, second only to the government's monthly survey of the job market. To see major revisions to such a report the day it's released was highly unusual, traders said, especially for a report that is so relied on each month.

"It's a debacle, as far as ISM is concerned," said Tom di Galoma, head of fixed income rates at ED&F Man Capital. "It's hurt their credibility and it's going to take a while for that to recover."

Investors also got some positive manufacturing news out of Asia. A Chinese manufacturing index edged up to 50.8 in May from 50.4 in April.

Asian stocks rose on the report. Japan's Nikkei rose 2.1 percent Monday.

Trading is expected to be quiet until later this week. Investors will get the May jobs report Friday, and the European Central Bank will announce its latest interest rate policy decision Thursday.

Economists expect that companies hired 220,000 workers last month, and that the unemployment rate remained steady at 6.3 percent, according to FactSet.

Other than the manufacturing reports, traders had little news to work with on Monday.

The real-estate investment trust Ventas said it would buy American Realty Capital Healthcare Trust in a $2.6 billion cash-and-stock deal. The companies each own medical care offices along with other properties. A.R.C.'s stock rose 96 cents, or 10 percent, to $10.91 while Ventas fell $1.87, or 3 percent, to $64.93.

Semiconductor maker Broadcom was the biggest advancer in the S&P 500, jumping $2.97, or 9 percent, to $34.84. The company said it is exploring options for its cellular chip business, which could include selling the division or shutting it down.

The yield on the 10-year Treasury note rose to 2.53 percent from 2.48 percent on Friday. Even with the modest increase, bond yields are still trading near their lows for the year. Bond investors expect yields to remain at these levels for the foreseeable future.

"You're still looking at a global economic picture that needs a lot more growth," said Robert Tipp, chief investment strategist for Prudential Fixed Income.

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