U.S. stocks kicked off the third quarter on a positive note Monday, with the main indexes reversing early losses to finish higher on the back of a rally in technology shares. However, worries over trade tensions between the U.S. and its major trading partners lingered, weighing on investors’ sentiment.
What did the main benchmarks do?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.75% rose 35.77 points, or 0.2%, to 24,307.18. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.58% gained 8.34 points, or 0.3%, to 2,726.71 and the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.26% climbed 57.38 points, or 0.8%, to 7,567.69.
What drove the markets?
Recent trading has been colored by uncertainty over trade policy, with investors seeking clarity about potential protectionist changes to U.S. policies and how they could be met by retaliatory measures. A trade war is seen as providing a significant headwind to global growth.
On Sunday, President Trump said he sees his threat to impose global auto tariffs as his biggest weapon to extract concessions from trading partners. At the same time, he called the EU “as bad as China” in hindering U.S. trade.
Meanwhile, a Financial Times report on Sunday said the European Union has threatened $300 billion in fresh tariffs against U.S. products if Trump follows through on his threatened 20% levies targeting the trade bloc’s auto makers. And Canadian retaliatory tariffs took effect Sunday, with those measures serving as a response to U.S. metals tariffs.
In another significant question mark, Axios reported that the Trump administration had crafted a draft bill that would declare America’s abandonment of World Trade Organization rules. This would essentially give Trump a license to raise tariffs at will, without congressional consent and largely outside of the international rules governed by the WTO.
Trading may be volatile this week, as some market participants will be out of the office for the Fourth of July holiday, for which markets will be closed on Wednesday. Lower trading volume can exacerbate day-to-day swings.
Which economic reports are in focus?
A read on June manufacturing from Markit came in at 55.4, compared with a preliminary reading of 54.6.
Separately, the Institute for Supply Management’s manufacturing index rose to 60.2% in June from 58.7%. A read on construction spending rose 0.4% in May.