Market Snapshot: Dow up 300 points, Nasdaq under slight pressure after weaker-than-expected ISM manufacturing data

Read: Charlie Munger ‘hates’ bitcoin’s rise: ‘disgusting and contrary to interests of civilization’

What’s driving the market?

The positive tone in U.S. equities at the start of the session took a brief hit after some economic data suggested the rebound in manufacturing could be slowing, albeit to levels of industrial activity still considered brisk.

The manufacturing index from the Institute for Supply Management fell to 60.7% in April from a 38-year high of 65% in the prior month. Though, any number above 50 marks an increase in factory activity, April’s reading fell short of analysts’ expectations for 65.

“Whether that pace [of manufacturing activity] can be maintained remains to be seen,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Even a well-positioned and eager consumer sector could cool as price hikes accelerate, and the potential for supply-chain disruptions to slow production further could further curtail sales.”

Even with continued disruptions to supply chains, investors remain focused on a bright outlook for U.S. corporations despite the COVID pandemic, with some of the biggest companies affirming that a genuine rebound is under way.

The revival was at least partially on display as conglomerate Berkshire Hathaway
BRK.A,
+2.09%

BRK.B,
+1.88%
reported a 20% jump in its operating profit, rising to $7.02 billion from $5.87 billion in the year prior.

Berkshire, helmed by billionaire investor Warren Buffett, over the weekend also reported first-quarter net income of $11.7 billion, compared with a loss of $49.7 billion, in the year-earlier period.

See: Berkshire’s Munger: Stock buybacks for benefit of shareholders a ‘deeply moral’ act

Berkshire’s performance has helped to bolster confidence in equities to kick off May, traditionally a month associated with the start of a comparatively weak six-month seasonal stretch of trading. Of the S&P 500 companies that have reported results so far, 86% have beaten earnings expectations.

“We look for a positive start of trading in May as investors are likely to adopt to sideways movements, while staying clear of ‘Selling And Going Away In May’,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities.   

Investors also saw positive developments from Europe, bolstering confidence in the eurozone recovery. The European Commission on Monday proposed allowing entry by nonessential travelers who have been fully vaccinated to the region.

Looking ahead, investors are watching for further commentary from Federal Reserve Chairman Jerome Powell, who is scheduled to speak at 2:20 p.m. Eastern Time at the Just Economy conference, which is being held virtually.

Anxieties surrounding the Fed’s response to a stronger economy also has investors on edge after Dallas Fed President Robert Kaplan said Friday that he thinks it is time to discuss tapering the central bank’s asset purchases.

Bernard Baumohl, chief global economist at The Economic Outlook Group, recently wrote that the Fed will have to walk a fine line as it eventually dials up interest rates and tapers an asset-purchasing program that has helped to support markets during the height of the pandemic-inspired stock selling in March.

“So what should the Fed do at this stage? Frankly, nothing major at this time. But as the economy regains its footing, Powell will face one truly vexing issue later this year: How do you reduce asset purchases without causing major turbulence in the bond market?” wrote Baumohl.

Which companies are in focus?

• Shares of Berkshire’s Class B shares
  BRK.B,
  +1.88%
  were up 1.6% after Buffett said Greg Abel, the conglomerate’s vice chairman in charge of non-insurance operations, would be his successor as CEO if Buffett left the job.

• Tesla Inc. shares
  TSLA,
  -3.22%
  were trading lower by 3.1% after a German magazine reported that Tesla’s gigafactory in Berlin is likely to be delayed by six months.

• Shares of Verizon Communications Inc.
  VZ,
  +0.84%
  inched higher after it announced it would sell Verizon Media, including Yahoo and AOL brands, for $5 billion to private-equity firm Apollo Global.

• Domino’s Pizza Inc.
  DPZ,
  +2.98%
   said in a Monday filing that it has entered into a $1 billion accelerated share repurchase agreement with Barclays.

• Shares of GameStop Corp.
  GME,
  -5.23%
   fell 4.3%, after the videogame and consumer electronics retailer announced it has effectively eliminated its long-term debt.

• Estée Lauder Companies
  EL,
  -7.22%
  shares slid 6.5%, after the cosmetics and beauty company posted stronger-than-expected profit for its fiscal third quarter but sales that missed estimates.

How are other assets faring?

• Hong Kong’s Hang Seng index
  HSI,
  -1.28%
  fell 1.3%. Bourses in Shanghai and Tokyo were closed. The Stoxx Europe 600
  SXXP,
  +0.58%
  was up 0.5%.

• The 10-year Treasury note yield
  TMUBMUSD10Y,
  1.616%
  fell to 1.602%, following the weakening manufacturing data.

• The greenback was on the backfoot, trading down 0.4% based on the ICE U.S. Dollar Index.
  DXY,
  -0.33%
• Prices for gold futures
  GC00,
  +1.39%
  were up 1.4% to $1,7931.80 an ounce on Comex. U.S. crude futures
  CL.1,
  +0.98%
  were up 1.4% to $64.48 a barrel.