RTTNews - Stocks are holding onto strong gains in mid-afternoon trading on Monday, poised to extend their winning streak for a third straight session. The major averages are all trading firmly in positive territory after seeing early strength in reaction to largely encouraging economic data.

Traders considered data from the Institute for Supply Management that showed a slower pace of contraction in activity in the manufacturing sector. The report also showed an expansion in new orders for the first time since November of 2007

Further, construction spending unexpectedly increased in the month of April, according to a report released by the Commerce Department, with the unexpected growth reflecting a notable increase in spending on private construction.

The Commerce Department also released a separate report showing that personal income unexpectedly rose in the month of April, with the increase partly due to the reduced taxes and increased social benefit payments associated with the government's economic stimulus plan.

The major averages saw some further upside in the early afternoon hours and are currently holding just off of their best levels of the day. The Dow is currently up 228.12 at 8,728.45, the Nasdaq is up 53.60 at 1,827.93, and the S&P 500 is up 25.72 at 944.86.

Dow Components

Most of the Dow components are in the green, helping the blue chip index to post a substantial gain in mid-afternoon dealing.

Turning in one of the day's best performances are shares of Boeing (BA), which are up by 6 percent on the day. The gain has lifted the stock to its best level since November, nearly a seven-month high.

Shares of Alcoa (AA) and Caterpillar (CAT) are also helping to bolster the index, rising by 6.8 percent and 6.1 percent, respectively. The stocks have gained amid news that construction spending has climbed for the second month in a row, raising revenue prospects for construction related equities.

American Express (AXP), Intel (INTC) and Dupont (DD) are among the other Dow components posting notable gains. On the other hand, share of Pfizer (PFE) are seeing some weakness, with the drug giant currently down 1.8 percent.

Meanwhile, General Motors (GM) and Citigroup (C) are currently on opposite sides of the unchanged line after Dow Jones revealed that the stocks would be removed from the Dow, to be replaced by Cisco (CSCO) and Travelers (TRV). The changes will be effective with the opening of trading next Monday.

Sector News

Most of the major sectors continue to surge in mid-afternoon dealing, helping the major averages to add to their already strong gains.

Semiconductor stocks have shown considerable gains, with the Philadelphia Semiconductor Index up by 5.4 percent on the day. With the advance, the index reached its best intra-day level in nearly eight months.

While an industry report from the Semiconductor Industry Association said sales fell 25 percent in April compared to the same period last year, they edged out the previous month's sales by 6.4 percent.

Steel stocks also continue to advance on the day, as reflected by the 7.5 percent gain currently being shown by the Amex Steel Index. With the advance, the index has added to its recent gains to reach its best intra-day level in eight months.

Commercial real estate stocks are also on the rise, with the Morgan Stanley Real Estate Index climbing by 4.7 percent on the session. Notable strength is also visible among retail, transportation and healthcare provider stocks.

Despite the upward move by the majority of equities, some gold stocks are moving to the downside, with the Amex Gold Bugs Index retreating by 1.9 percent. The weakness in the sector comes amid a modest decrease by the price of gold.

In Focus: Economic Data, GM Bankruptcy, Geithner in China

A report from the Institute for Supply Management showed that the index of activity in the manufacturing sector rose to 42.8 in May from 40.1 in April, with a reading below 50 indicating a contraction. Economists had been expecting the index to edge up to a reading of 42.0.

A turnaround in new orders contributed to the improvement in the sector, with the new orders index climbing to 51.1 in May from 47.2 in April. This marked the first time the index has been above 50 since November of 2007.

Data from the U.S. Commerce Department said that construction spending increased by 0.8 percent to an annual rate of $968.7 billion in April following a revised 0.4 percent increase in March. Economists had expected spending to decrease by about 0.8 percent.

Meanwhile, in a separate report, the Commerce Department said that personal income increased by 0.5 percent in April following a revised 0.2 percent decrease in March. The increase surprised economists, who had expected income to fall by 0.2 percent compared to the 0.3 percent decrease originally reported for the previous month.

The data also revealed that personal spending edged down 0.1 percent in April after falling by a revised 0.3 percent in the previous month. Economists had expected the drop in personal spending to match the 0.2 percent decrease originally reported for March.

On the corporate front, auto giant General Motors officially filed for bankruptcy this morning. The Obama administration said Sunday that it has deemed GM's reorganization plan viable and will provide the company $30.1 billion in debtor-in-possession financing.

President Barack Obama addressed GM's bankruptcy filing Monday, stressing that the government is acting as reluctant shareholders with a 60 percent stake in the company and hoping for a swift bankruptcy process.

Obama said that while GM's trip through bankruptcy will likely be longer than Chrysler's swift 31 days, he hopes that the embattled automaker will emerge from the Chapter 11 process quickly.

The president defended his administration's actions with the automaker, stating that his people inherited a severe financial crisis unlike any we have seen in our time that put the government in an unwelcome position.

Meanwhile, speaking at Peking University in Beijing, Treasury Secretary Tim Geithner assured China that their hold in U.S. government debt, which is the biggest in the world, is safe due to the fact that the U.S. is committed to paying down the debt as soon as the economy is on a firm path toward recovery.

China is America's biggest creditor with an estimated $770 billion invested in U.S. treasury bonds.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region soared on Monday. Japan's benchmark Nikkei 225 Index rose by 1.6 percent, while China's Hang Seng climbed 3.4 percent.

The major European markets also closed considerably higher. The French CAC 40 Index and the German DAX Index finished up by 3.1 percent and 4.1 percent, respectively, while the U.K.'s FTSE 100 Index also enjoyed notable strength, closing up by 2.0 percent.

In the bond markets, treasuries continue to see substantial weakness, more than offsetting the gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note is trading at 3.71 percent, an increase of 24.5 basis points on the day.

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