RTTNews - Stocks were able to extend their gains for a third straight session on Monday, seeing a notably strong outing for the first trading day of June. The major averages all finished firmly in positive territory, with the Nasdaq and S&P 500 closing at their best levels of the year.

Trader confidence was boosted by an influx of largely promising economic figures, with data from the Institute for Supply Management showing a slower pace of contraction in activity in the manufacturing sector in the month of April.

The report 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.

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.

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 regarding to 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.

The major averages saw additional upside in the afternoon dealing and finished just off of their best levels of the day. The Dow closed up 221.11 points or 2.6 percent, at 8,721.44, the Nasdaq finished up by 54.35 points or 3.1 percent, at 1,828.68, and the S&P 500 rose 23.73 points or 2.6 percent to 942.87.

Sector News

Most of the major sectors held onto strong gains heading into the closing bell on Wall Street, helping the major averages to finish substantially higher.

Transportation stocks advanced considerably on the day, led by a climb in railroad stocks. Subsequently, the Dow Jones Railroad Index finished up by 5.6 percent on the day, reaching its best closing level in well over 4 months.

Trucking and airline stocks also rose despite the price of oil hitting its highest level in 7 months, finishing at $68.42 per barrel. Notable strength was also visible among steel, retail, oil service and semiconductor stocks.

Despite the rally seen in the majority of equities, some gold and banking stocks experienced a retreat on the day. The Amex Gold Bugs Index and the Dow Jones Banking Index fell by 2.6 and 0.9 percent, respectively.

Dow Components

Most of the Dow components finished in the green, helping the blue chip index to finish at a nearly five-month closing high.

Bolstering the Dow were shares of United Technologies (UTX), which rose by 5.1 percent on the day. The day's gain lifted the stock to its best closing level in nearly seven months.

Boeing (BA) also turned on one of the day's best performances, rising 6.4 percent on the day. The gain lifted the stock to its best closing level since November, nearly a seven-month closing high.

Shares of Alcoa (AA) and Caterpillar (CAT) also bolstered the blue chip index, rising by 6.6 percent and 6.4 percent, respectively. The stocks gained amid news that construction spending climbed for the second month in a row, raising revenue prospects for construction related equities.

American Express (AXP), Intel (INTC) and Dupont (DD) were among the other Dow components to see notable gains on the day. On the other hand, shares of Pfizer (PFE) and JP Morgan Chase (JPM) fell by 2.8 and 2.1 percent, respectively.

Meanwhile, General Motors (GM) and Citigroup (C) are set to be removed from the Dow and replaced by Cisco (CSCO) and Travelers (TRV). The changes will be effective with the opening of trading next Monday.

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 closed substantially lower, more than offsetting the gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note finished at 3.72 percent, an increase of 25.0 basis points on the day.

Looking Ahead

Tuesday morning, traders will be presented with forward-looking industry data from the housing sector. The National Association of Realtors will reveal its pending home sales figures for the month of April, with the pending home sales expected to edge up by 0.5 percent.

Trading could also be impacted by the release of reports on May auto sales from the major automakers, especially given the backdrop of General Motors' bankruptcy filing.

For comments and feedback: contact editorial@rttnews.com