By Alexander Osipovich, Anna Isaac and Xie Yu
Stocks posted small gains Monday as investors embraced signs that global factory activity was on a path toward recovery and largely shrugged off the violent clashes in U.S. cities.
The Dow Jones Industrial Average ticked up 55 points, or 0.2%, in midday trading, bouncing back after losing more than 100 points just after the opening bell.
The S&P 500 was up 0.2%, while the Nasdaq Composite gained 0.4%. Overseas, major European and Asian indexes posted gains.
Data from surveys of purchasing manufacturers indicated that factories in the U.S. and abroad continued to reduce output last month, but the pace of deterioration slowed as governments eased coronavirus-related restrictions. In China -- the first country to impose sweeping lockdowns to combat the virus -- factories reported an increase of activity, offering investors hope that other countries would follow.
In the U.S., the Institute for Supply Management's manufacturing index for May rose to 43.1 from an 11-year low of 41.5 in April. A reading above 50.0 indicates an increase in activity, while a reading below that level indicates a decrease.
"The hope is that what we've seen with China is playing out in Europe, and there will eventually be follow-through in the U.S. once the virus is under containment," said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.
Investors largely seemed to discount the clashes between police and civilians in the U.S. as the worst civil unrest in decades erupted in American cities this weekend.
"Markets are assuming it won't last. We've seen this all before, going back to the civil protests in the 1960s," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "If cities go on to be closed down due to curfews and so on, then that would be disastrous for companies trying to reopen. Too soon to tell."
Drugmaker Pfizer fell 8.1%, weighing on the Dow. The drugmaker said late Friday that it would stop a study of a potential breast cancer treatment.
In bond markets, the yield on the 10-year U.S. Treasury ticked up to 0.674%, from 0.650% Friday.
Investors continued to monitor tensions between the U.S. and China, which have feuded in recent weeks over Beijing's handling of the coronavirus and its crackdown on Hong Kong. Bloomberg News reported Monday that China has ordered companies to temporarily halt imports of some U.S. farm goods including soybeans.
Such a move could add to the friction between the world's two largest economies. A U.S.-China trade war roiled markets for much of 2019 and ended only after both sides agreed to a Phase One trade deal.
"If it is true China will buy less soybeans, it will increase the chances of escalation with the U.S.," said Seema Shah, chief strategist at Principal Global Investors. Such a move would suggest that "China is predicting the upcoming U.S. election means that President Trump's bark will be worse than his bite."
Mr. Trump blasted Beijing on Friday for "absolutely smothering Hong Kong freedoms," but he stopped short of announcing specific actions in response and he left the Phase One trade deal in place, to the relief of investors. Hong Kong's benchmark stock index surged 3.4% on Monday.
In Europe, the pan-continental Stoxx Europe 600 climbed 1.1%. Shares of Associated British Foods, owner of clothing retailer Primark, rallied 8% after it said it would be opening stores in coming weeks in response to loosening government lockdowns.
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