Dow, S&P 500 rise on optimism about economic recovery

The S&P 500 and the Dow rose on Tuesday, with the benchmark S&P 500 within 0.5% of its record high as investors cheered signs of an improving economy ahead of a week packed with major data that is expected to shed more light on the path of inflation.

The two indexes are rising for the fourth straight session as investors bet on economically sensitive stocks benefiting the most from a post-COVID-19 recovery. The S&P 1500 airlines index added 2.7%.

The S&P energy index jumped 3.8% on a promising outlook for fuel demand, while financials and materials were up almost 1% each.

Stock markets were unperturbed on Friday by a surge in key inflation readings for April following reassurances from Federal Reserve officials that the ultra-loose monetary policy would remain in place.

Latest data showed US manufacturing activity picked up in May as pent-up demand amid a reopening economy boosted orders, but unfinished work piled up because of shortages of raw materials and labor.

Focus will be on key manufacturing and services sector Purchasing Managers' Indexes (PMIs) later in the week to judge the pace of an economic reopening, with the main event of US payrolls due on Friday.

"For now, they (investors) are embracing the economic data that shows improvements in the economy and are ignoring data that suggests that it's going to lead to much higher prices and shortages that affect specific companies," said Rick Meckler, partner, Cherry Lane Investments in New Vernon, New Jersey.

"The main driver behind the stock market is the reopening of the country ... that's motivating investors to feel a sense of optimism about markets and cause them to come back in and buy stocks with the idea that things will be better by the fall and earnings will improve."

American Airlines, United Airlines and Marriott International, the travel stocks that stand to perform better as the economy reopens, gained between 1.1% and 2.4%.

At 10:19 a.m. ET, the Dow Jones Industrial Average was up 118.64 points, or 0.34%, at 34,648.09 and the S&P 500 was up 4.33 points, or 0.10%, at 4,208.44.

The Nasdaq Composite was down 26.13 points, or 0.19%, at 13,722.61 as losses in Apple Inc, Microsoft Corp and Netflix Inc weighed.

Cloudera Inc jumped 23.6% after private equity firms KKR & Co and Clayton Dubilier & Rice LLC agreed to take the data analytics firm private in a $5.3 billion dollar deal.

A group of "meme stocks" extended gains from the previous week with shares of AMC Entertainment Holdings Inc up 14.5% after the movie theater chain announced a $230 million capital raise.

Abbott Laboratories fell 6.2% after cutting its full-year 2021 profit forecast due to a projected drop in COVID-19 diagnostic testing demand.

Advancing issues outnumbered decliners by a 2.47-to-1 ratio on the NYSE and by a 1.36-to-1 ratio on the Nasdaq.

The S&P index recorded 59 new 52-week highs and no new low, while the Nasdaq recorded 114 new highs and 11 new lows.