Stocks Nearly Flat After ISM Issues Correction - U.S. Commentary

(RTTNews) - With traders digesting news of a correction to a disappointing reading on U.S. manufacturing activity, stocks have shown a lack of direction over the course of the trading day on Monday. The major averages have spent the day bouncing back and forth across the unchanged line.

Currently, the major averages are turning in a mixed performance. While the Nasdaq is down 6.54 points or 0.2 percent at 4,236.08, the Dow is up 19.35 points or 0.1 percent at 16,736.52 and the S&P 500 I sup 0.74 points or less than a tenth of a percent at 1,924.31.

While selling pressure was initially generated by a report from the Institute for Supply management showing an unexpected slowdown in the pace of growth in the manufacturing sector, the group later revealed that the data was incorrect.

Due to a software error that applied last month's seasonal adjustment factor to this month's data, the ISM originally said its manufacturing index dropped to 53.2 in May from 54.9 in April.

However, the ISM later clarified that the index should have risen to 56.0 in May, which would have come in above the 55.5 expected by economists. A reading above 50 indicates growth in the sector.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Overall, based on the corrected survey, it appears that manufacturing activity is still gathering momentum after the winter slowdown."

A separate report from the Commerce Department showed that construction spending rose by less than expected in the month of April.

The report said construction spending edged up 0.2 percent to annual rate of $953.5 billion in April from the revised March estimate of $951.6 billion. Economists had been expecting spending to increase by about 0.6 percent.

Revised data showed that the modest increase in April came after spending rose 0.6 percent in March and 0.4 percent in February.

The three consecutive monthly increases lifted the annual rate of construction spending to its highest level since March of 2009.

Sector News

Most of the major sectors are showing only modest moves in mid-day trading, contributing to the lackluster performance by the broader markets.

While some strength has emerged among chemical stocks, weakness remains visible in the networking and computer hardware sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index surged up by 2.1 percent, while Australia's All Ordinaries Index rose by 0.5 percent. The markets in Hong Kong and mainland China were closed for holidays.

Meanwhile, the major European markets turned in a mixed performance. While the French CAC 40 Index edged down by 0.1 percent the U.K.'s FTSE 100 Index rose by 0.3 percent and the German DAX Index inched up by 0.1 percent.

In the bond market, treasuries have moved notably lower on the day, pulling back further off their recent highs. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.8 basis points at 2.525 percent.