The S&P 500 and the Dow ended with modest gains on Monday after manufacturing data raised concerns about a slowing U.S. economy that could help bring down inflation amid ongoing debt ceiling negotiations, while a rise in Meta shares helped lift the Nasdaq.
The New York Federal Reserve's "Empire State" index, a gauge of manufacturing activity in New York State on current business conditions, tumbled to a reading of -31.8 in May, against expectations of -3.75.
"This is always tough because we are in a period now where bad news is actually good news from a stocks standpoint and vice versa, but you still get the market reacting when you get a bad number because everybody then begins to worry about a recession," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
"So we want the economy to be weak enough to bring down inflation but not so weak that it causes a recession."
Analysts cautioned that the barometer is also volatile, lessening its impact.
Also keeping markets subdued was the wrangling in Washington between the White House and Republicans in debt-ceiling talks, with a meeting scheduled for Tuesday, although it was unlikely a deal would be reached then.
"We’ve been through this before, eventually they come to their senses and do something, compromise and actually get something done instead of playing this game of chicken, it’s really who blinks first," said Ghriskey.
The Dow Jones Industrial Average rose 47.98 points, or 0.14%, to 33,348.6, the S&P 500 gained 12.2 points, or 0.30%, to 4,136.28 and the Nasdaq Composite added 80.47 points, or 0.66%, to 12,365.21.
Meta Platforms Inc climbed 2.16% as one of the top boosts to both the Nasdaq and S&P 500 after Loop Capital upgraded it to "buy" from "hold."
In a relatively light week for economic data, investors will focus on retail sales, weekly jobless claims and housing data.
Slowing economic data has heightened expectations for when the Federal Reserve will pause its interest rate hike cycle as the central bank tries to stamp out high inflation.
On Monday, several Fed officials indicated they expect interest rates to stay high, at odds with market expectations for a rate cut before the end of the year.
In addition, Richmond Federal Reserve President Thomas Barkin said in an interview with Reuters that he is not yet convinced inflation is on a steady path downward, although he is comfortable with the Fed using a data-dependent approach for additional rate hikes.
Fed Chair Jerome Powell is scheduled to speak on Friday and investors will monitor his comments for any signals on the path of interest rates this year.
Oneok Inc slumped 9.06% after it agreed on Sunday to buy U.S. pipeline operator Magellan Midstream Partners in a $18.8 billion deal. Shares of Magellan rallied 12.99%.
Western Digital Corp climbed 11.26% after Reuters reported the memory chip firm and its Japanese JV partner Kioxia Holdings Corp are speeding up merger talks.
Volume on U.S. exchanges was 9.06 billion shares, compared with the 11.1 billion average for the full session over the last 20 trading days.
Advancing issues outnumbered declining ones on the NYSE by a 2.10-to-1 ratio; on Nasdaq, a 1.85-to-1 ratio favored advancers.
The S&P 500 posted nine new 52-week highs and seven new lows; the Nasdaq Composite recorded 59 new highs and 136 new lows.
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