[BRIEFING.COM] The third quarter got off to a good start as the major indices spent the entirety of today's abbreviated session in positive territory, aided by bargain hunting activity and a batch of economic data that supported the view that the Fed is likely to take a rate hike breather at the August FOMC meeting.
Specifically, the ISM Index slipped to 53.8 in June (consensus 55.0) from 54.4 in May while construction spending declined 0.4% in May (consensus +0.2%) versus a 0.2% decline in April. While a bit disappointing in their own right relative to expectations, the reports nonetheless validated the idea that economic growth is moderating - and it is that moderation, the Fed indicated in its recent FOMC statement, that should help to limit inflation pressures over time.
There was a brief dip in the indices following the release of the data, but it wasn't long before they resumed their upward path to close near their highs for the session. Sellers, for the most part, were sidelined throughout a session that was accented by broad-based participation, influential sector leadership, and light-to-moderate volume for holiday trading activity.
All ten economic sectors ended the day with a gain, the largest of which were recorded by the basic materials (+1.39%), energy services (+1.22%), information technology (+1.19%) and financial (+1.13%) sectors. Given their frontrunning status, it was little surprise to see that advancers outnumbered decliners at the NYSE by a better than 2-to-1 margin.
Frankly, it is not all that uncommon to see a new quarter start on a winning note, particularly when the market is coming off a quarter that saw some significant selling pressure and created a sense that there are some bargain hunting opportunities to be had. On that note, it was striking that some of the second quarter's biggest laggards - basic materials, broker/dealers, and semiconductors - were among the best-performing stocks on Monday.
Further evidence of the bargain hunting mentality that drove Monday's session was the seeming dismissal of Wal-Mart's (WMT 47.57, -0.60) disappointing news that June same-store sales were up 1.2%, or at the low end of the company's prior forecast for 1-3% growth. Other retailers will be reporting their same-store sales results on Thursday. The Consumer Discretionary (+0.07%) brought up the rear as far as sector performances were concerned.
Separately, General Motors (GM 29.41, -0.38) remained in the spotlight following news that Nissan's board approved exploratory discussions on a three-way partnership with Renault and GM. Although GM was upgraded by Banc of America to Neutral from Sell, the stock failed to gain further ground as early reports of disappointing auto sales in June from other industry participants took the wind out of its sails.
Separately, both the dollar index and the Treasury market were near unchanged on Monday while trading was closed in the commodity pits.
Happy Fourth of July! The markets will be open again for trading on Wednesday, July 5. NYSE Adv/Dec 2389/825...Nasdaq Adv/Dec 1723/1173
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