U.S. Stocks Shake Off Manufacturing Weakness to Close Higher

U.S. stocks reversed early session losses to finish higher Monday, as investors looked past soft manufacturing data and tariff-related headwinds to focus on corporate developments and a late-day rally in tech shares.

The Dow Jones Industrial Average rose 35.41 points, or 0.08%, to close at 42,305.5. The S&P 500 gained 24.25 points, or 0.41%, ending the day at 5,935.94. The Nasdaq Composite led the major indexes, climbing 128.85 points, or 0.67%, to 19,242.6. The Russell 2000 added 0.67 points, or 0.33%, to finish at 205.74.

The rally came despite downbeat macroeconomic data released earlier in the day. The Institute for Supply Management’s (ISM) Manufacturing PMI fell to 48.5 in May, below economists’ expectations of 49.5. It marked the third consecutive month of contraction in U.S. factory activity — an indication that the industrial sector continues to wrestle with high input costs, soft demand, and tariff-related disruptions.

“The soft report may nudge expectations toward additional Fed cuts, especially given cooling inventories and weak international trade readings,” noted the ISM summary, though Treasury yields were little changed immediately after the data release.

While subindices for production and new orders showed modest improvements, employment and inventories remained in contraction. The Prices Paid index — a key inflation gauge — held steady at a historically high 69.4, signaling that input cost pressures remain elevated. “Aluminum, steel, and electrical components” were all cited as contributors to the stickiness in input inflation.

Tariffs were a central concern for manufacturers. Respondents to the ISM survey pointed to worsening supply chain disruptions related to U.S. trade policy, particularly regarding steel and electronics. The Imports Index fell sharply to 39.9, while New Export Orders dropped to 40.1, indicating steep declines in global trade flows.

Still, equities brushed aside macroeconomic worries, with sentiment bolstered in part by investor reaction to corporate headlines. UnitedHealth Group shares rose 1.12% to $304.80 after shareholders approved a $60 million pay package for newly appointed CEO Steve Hemsley. The vote signaled investor support for the company’s turnaround plan as it works to address surging costs in its Medicare Advantage business.

“The approval of Hemsley's compensation package indicates investor confidence in the new leadership,” the company said during its annual meeting, where Hemsley pledged to improve margins and stabilize the firm’s insurance operations.

Looking ahead, market participants are likely to remain focused on developments around trade policy, corporate earnings guidance, and signals from the Federal Reserve, particularly as inflation and global trade friction continue to complicate the economic landscape.

Despite Monday’s mixed signals, the stock market’s late-session resilience suggests that investors remain cautiously optimistic heading into the week.