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Stocks Close Modestly Higher As Trump-Kim Summit Looms - U.S. Commentary


After initially showing a lack of direction, stocks moved modestly higher over the course of the trading session on Monday. With the upward gains on the day, the Dow and the S&P 500 reached their best closing levels in three months.

The major averages pulled back going into the close but managed to end the day in positive territory. The Dow inched up 5.78 points or less than a tenth of a percent to 25,322.31, the Nasdaq rose 14.41 points or 0.2 percent to 7,659.93 and the S&P 500 edged up 2.97 points or 0.1 percent to 2,782.00.

The higher close on Wall Street came as traders looked ahead to the historic summit between President Donald Trump and North Korean leader Kim Jong Un on Tuesday.

Ahead of the meeting, Secretary of State Mike Pompeo indicated the U.S. is prepared to offer North Korea "unique" security assurances in exchange for the complete, verifiable and irreversible denuclearization of the Korean peninsula.

In remarks last Thursday, Trump expressed some optimism about his meeting with Kim but stressed that he is willing to walk away from negotiations.

Trump said his administration has stopped using the term "maximum pressure" with regard to North Korea and suggested the success of the negotiations could be determined by whether he uses the words after the meeting.

In addition to the highly anticipated Trump-Kim meeting, traders are also looking ahead to monetary policy announcements by the Federal Reserve and the European Central Bank.

The Fed is widely expected to raise interest rates by 25 basis points, while the ECB has indicated its meeting will be used to discuss ending its bond purchasing program.

Reports on consumer and producer price inflation, retail sales, and industrial production are also likely to attract some attention this week.

Meanwhile, trade concerns continue to hang over the markets after Trump backed out of a joint G7 communiqué over the weekend.

Trump continued to hammer U.S. allies on trade after leaving the G7 summit early in order to attend the meeting with Kim in Singapore.

Sector News

Natural gas stocks showed a significant move to the upside on the day, driving the NYSE Arca Natural Gas Index up by 1.7 percent.

The strength among natural gas stocks came amid an increase by the price of the commodity, with natural gas for July delivery climbing $0.059 to $2.949 per million BTUs.

Considerable strength also emerged among transportation stocks, as reflected by the 1.1 percent gain posted by the Dow Jones Transportation Average. The average reached its best closing level in well over four months.

Computer hardware and gold stocks also saw some strength on the day, while interest-rate sensitive utilities stocks moved to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index rose by 0.5 percent, while China's Shanghai Composite Index fell by 0.5 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the French CAC 40 Index climbed by 0.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index advanced by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries moved moderately lower after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2 basis points to 2.957 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to news regarding to the meeting between Trump and Kim, with the president due to speak to the media before departing Singapore at about 8 am ET.

Trump's comments about the summit are likely to overshadow the Labor Department's report on consumer price inflation in the month of May.

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