Despite lackluster global manufacturing reports, benchmarks finished in the green following a late recovery in oil prices and higher-than-expected U.S. manufacturing data. Oil prices curbed most of their losses following possibilities that OPEC members might consider setting a production ceiling in today's meeting. Also, expansion in domestic manufacturing activity had a positive impact on the markets with the Nasdaq registering its sixth consecutive session gain since Feb 2015.
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The Dow Jones Industrial Average (DJI) increased 2.47 points, to close at 17,789.67. The S&P 500 rose 0.1% to close at 2,099.33. The tech-laden Nasdaq Composite Index closed at 4,952.25, also gaining 0.1%. However, the fear-gauge CBOE Volatility Index (VIX) increased 0.1% to settle at 14.20. A total of around 6.5 billion shares were traded on Wednesday, lower than the last 20-session average of 7 billion shares. Advancers outpaced declining stocks on the NYSE. For 64% stocks that advanced, 33% declined.
Oil prices curtailed most of their losses yesterday on reports that OPEC members are most likely to discuss capping crude production in today's meeting at Vienna. WTI and Brent crude hit intraday lows of $47.75 per barrel and $48.65 per barrel respectively. However, oil prices recovered lately with the WTI crude falling only 0.2% to $49.01 per barrel and Brent crude rising 0.04% to $49.71 a barrel.
Moreover, the Institute for Supply Management (ISM) manufacturing index increased from 50.8% in April to 51.3% in May, higher than the consensus estimate of 50.5%. Twelve out of 18 manufacturing industries reported growth, which resulted in better-than-expected manufacturing data. ISM manufacturing index posted its third straight monthly rise in May.
Recovery in oil prices and favorable manufacturing data had a positive impact on key U.S. indexes. The Consumer Staples Select Sector SPDR (XLP) advanced 1% and was biggest gainer among S&P 500 sectors. Key consumer staples stocks including Costco Wholesale Corporation ( COST ), Altria Group, Inc. ( MO ), Procter & Gamble Company ( PG ) and Philip Morris International, Inc. ( PM ) increased 2.5%, 1.1%, 0.9% and 0.7%, respectively.
In earnings news, Michael Kors Holdings Limited's ( KORS ) shares increased 6.6% after reporting fiscal fourth quarter earnings per share of 98 cents, more than the Zacks Consensus Estimate of 96 cents and increasing 8.9% year over year. Further, total revenue of 1,198.7 million came in above the Zacks Consensus Estimate of $1,150 million and also climbed 10.9% year over year. It was the biggest advancer among the S&P 500 companies.
Meanwhile, according to the Fed's Beige Book, economic activity was modest in most districts of the U.S. All the 12 districts indicated moderate growth in economic activity since the previous Beige Book report. Consumer spending and nonfinancial services activity registered moderate growth in most districts. Construction and real estate activity grew in most of the districts. Also, in the banking and finance sector, loan demand increased moderately and showed stable credit availability. Employment expanded moderately and so does wages following "tight labor markets."
However, as per the Fed's Beige Book, manufacturing activity remained mixed and agricultural economic conditions were weighed down by low commodity prices.
Also, the U.S. Census Bureau reported that construction spending decreased 1.8% from March to a seasonally adjusted annual rate of $1,133.9 billion in April. Construction spending posted its worst percentage fall since Jan 2011 and was also in contrast to the consensus estimate of 0.6% increase.
Moreover, Autodata reported that domestic vehicle sales in May came in at 13.7 million, which was more than the consensus estimate of 13.5 million but was less than April's reading of 13.8 million. Further, total vehicle sales increased only 0.3% in May to 17.45 million, lower than 17.8 million year-over-year.
Among the major automakers, Ford Motor Co. ( F ) and General Motors Company ( GM ) posted a year-over-year drop of 6% and 18%, respectively in their car sales last month. Shares of Ford and General Motors fell 2.8% and 3.4%, respectively.
Separately, disappointing global manufacturing data also weighed on investor sentiment. As per Markit Caixin data, China's manufacturing PMI declined from 49.4 in April to 49.2 in May. Also, Markit reported that manufacturing PMI of the euro zone fell from 51.7 in April to 51.5 last month.