Dow, S&P 500, Nasdaq Pare Gains On Soft ISM Manufacturing PMI

Stocks gapped higher to kick off the first day of trading in June. The Dow Jones popped 0.8% at the New York opening bell, leading both the S&P 500 and Nasdaq. Major stock indices are starting to peel back and close their gaps to the upside, however, as investors digest the latest round of ISM manufacturing PMI data just released. The ISM PMI report was somewhat disappointing when diving into the details.

DJIA – DOW JONES PRICE CHART: 15-MINUTE TIME FRAME (25 MAY TO 01 JUNE 2021)

Dow, S&P 500, Nasdaq Pare Gains on Soft ISM Manufacturing PMI

Chart by @RichDvorakFX created using TradingView

Headline manufacturing PMI crossed the wires at 61.2, which topped the market forecast of 61.0 and was higher than the prior reading of 60.7. The employment sub-component was quite weak at 50.9, however. That compares to the consensus forecast of 54.6 and prior reading of 55.1. This could potentially tee up a soft NFP report scheduled for release this Friday, 04 June at 12:30 GMT. The prices paid component of the manufacturing PMI report remains another point of concern for investors.

Though the prices paid component declined slightly from 89.6 in April to 88.80 in May, inflationary pressures across the manufacturing sector continue to persist and could complicate the transitory inflation narrative being spun by the Federal Reserve. Nevertheless, the month-over-month decline is likely a welcomed development. This, combined with lack of strong improvement in employment, could arguably keep FOMC taper hawks at bay. In turn, stocks have potential to stay broadly afloat.

The Dow Jones might look to defend last week’s high near the 34,600-price level as prior resistance-turned-support. Although, if risk trends deteriorate, perhaps corresponding with a notable spike higher in Treasury yields and the S&P 500-derived VIX Index, investors could steer the Dow Jones lower to test its 20-day simple moving average.

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