U.S. stocks on Monday erased losses after a survey of manufacturers showed the slowdown in factory production could soon end, offering signs that an economic rebound could take hold in the coming months.

Investors also handled signs of rising Sino-American trade tensions and watched violent protests that reverberated throughout the country, while also monitoring efforts by the U.S., and much of the world, to overcome the COVID-19 pandemic.

What are stock benchmarks doing?

The Dow Jones Industrial Average
DJIA,
+0.02%

rose 74 points, or 0.3%, to 25,457, after trading negative at the start of Monday’s session. The S&P 500
SPX,
+0.00%

was trading 6 points higher, or 0.2%, to 3,050. The Nasdaq Composite
COMP,
+0.19%

added 35 points, or 0.4%, to 9,525.

On Friday, the Dow booked a weekly gain of 3.8%, while the S&P 500 finished 3% higher and the Nasdaq Composite Index ended the period 1.8% higher. In May, the Dow logged a 4.3% gain, the S&P 500 climbed 4.5%, while the Nasdaq marked a 6.8% return on the month.

What’s driving the market?

Evidence of rising tensions between the U.S. and China and social unrest in America helped to create some headwinds for markets early Monday, but the bearish sentiment gave way after economic data underlined the progress from states taking away measures implemented to stem the spread of the COVID-19 disease. All 50 states are under some stage of reopening from forced shutdowns due to the pandemic.

The Institute for Supply Management said its manufacturing index climbed to 43.1% last month from an 11-year low of 41.5% in April. Economists surveyed by MarketWatch had forecast the index to total 44%. Readings under 50% indicate more companies are shrinking instead of expanding.

“The near-term path remains uncertain, but signs that the economy is picking itself up off the mat is a positive,” said Jim Baird, chief investment officer of Plante Moran Financial Advisors.

Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including pork and soybeans, Reuters and Bloomberg News reported on Monday, citing people familiar with the matter.

The moves come after President Donald Trump on Friday announced a number of measures, including paving the way for the U.S. to end Hong Kong’s special status, to address what he described as a number of violations. Those include Beijing’s handling of COVID-19, which was first identified in Wuhan in December.

Trump’s measures against China last week, however, were seen as less severe as feared and come as Beijing tightened its control over Hong Kong, implementing a new national-security law.

“There remain many other hurdles ahead, but clearly President Trump will try to avoid roiling markets until his election unless absolutely necessary,” said John Vail, chief global strategist at Nikko Asset Management.

The news reports of a suspension in certain farm purchases raises the threat of an erosion of a hard-fought, phase-one trade agreement between the U.S. and China that was signed earlier this year.

Meanwhile, a series of protests erupted across major cities from Los Angeles to New York after George Floyd, a black man, died last Monday following a confrontation with police in Minneapolis in which one officer, Derek Chauvin, was captured on video driving his knee onto Floyd’s neck until the handcuffed man lost consciousness and later died.

Read:Why is the U.S. stock market ignoring a brewing crisis in Hong Kong?

Angry clashes between civilians and law enforcement, including fires near the White House, aren’t expected to have long-term economic implications, but the protests come as many retailers and businesses are still swooning from the pandemic and were caught up in looting and vandalism that ensued during the weekend demonstrations.

“The direct economic impact of the protests is small, at least so far,” Mark Zandi, chief economist of Moody’s Analytics, told MarketWatch. However, he said that the near-term damage to the psyche of consumers and the business community may be more substantial.

“Just when people were starting to come out of the proverbial bunkers, the protests may be too much for them, and they will go back in,” he said. “The protests are also symptomatic of just how deep the economic problems and racial tensions go in our country,” the economist said.

Experts also worry that the throngs of people gathering may also create the conditions for a second wave of COVID-19 infections, just as public health officials hoped they were getting a handle on the viral outbreak.

“It’s a triple whammy of protests, plus raging pandemic, plus economic instability. Those three things together make for a perfect storm of viral transmission,” Peter Chin-Hong, an infectious disease specialist at the University of California, San Francisco, told The Wall Street Journal.

Which stocks are in focus?
  • Protests slammed the stores of major retailers owned by Target Corp.
    TGT,
    -2.23%

    and Walmart Inc.
    WMT,
    -0.08%
    .
    Target shares were down 2.6%, while Walmart’s stock fell 0.4%.

  • Apple Inc.
    AAPL,
    +0.64%

    and CVS Health Corp.
    CVS,
    +0.24%

    also said they would temporarily close some of stores due to looting fears. Apple shares were up 0.9%, while CVS stock inched 0.2% higher.

  • Gilead shares fell 3.8% after the company released data from its phase three clinical trial for its experimental coronavirus treatment.
  • Southwest Airlines Co.
    LUV,
    +5.51%

    disclosed Monday that it received $651.8 million as the second tranche of the U.S. Department of Treasury’s Payroll Support Program. Its shares were up around 6.7%.

How are other markets trading?

West Texas Intermediate crude futures for July delivery
CLN20,
-2.31%

lost 91 cents, or 2.6%, to trade at $34.59 a barrel.

August gold
GCM20,
+0.08%

headed $9.40, or 0.5%, lower to trade at $1,741.60 an ounce on the New York Mercantile Exchange.

In global equities, the Stoxx Europe 600
SXXP,
+0.98%

index was trading 1.1% higher, while the FTSE 100 index
UKX,
+1.11%

traded up 1.1%.

In Asia, the Nikkei
NIK,
+0.84%

added 0.8%, and Hong Kong’s Hang Seng Index
HSI,
+3.35%

closed 3.4% higher, with traders citing relief over Trump’s Friday announcement.

The 10-year Treasury note yield
TMUBMUSD10Y,
0.685%

was 4 basis points higher at 0.68%. Bond prices move in the opposite direction of yields.

The greenback lost ground against its major rivals, with the ICE U.S. Dollar index
DXY,
-0.41%

down about 0.4%.


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