Stocks closed mixed as investors awaited key employment data out Friday, but the market overall ended the month of May with solid gains.
The Dow Jones Industrial Average, which edged lower on Thursday, finished up 4.4% for the month. The Nasdaq closed higher and was up 3% for May. The S&P 500, which closed at a new record high for the second straight day, rose 3.4% for the month.
Investors will be watching closely the May employment report, which will be released at 8:30 am Friday.
"The stock market really needs the number to be not too hot, not too cold, but really Goldilocks," said Brian Stine, investment strategist for Allegiant Asset Management. "If it's too weak, that means maybe we're getting close to a recession. If it's too strong, that means the Fed is not about to ease anytime soon and they could even be tightening."
Mixed Economic Data
On Thursday, investors received a mixed round of economic data, which showed sluggish economic growth in the first quarter, but strength in the labor market and strong business activity in the Midwest. Some traders suggested the sluggish economic data may put an interest rate cut back on the table, while others saw strength in business activity and the labor market as signs of a healthy economy.
"The market is interpreting whatever numbers come out positively," Jay Suskind, co-head of capital markets at Ryan Beck, told CNBC.com. "They are going to spin it positive whatever it is in terms of interest rates."
A new reading from the Commerce Department Thursday showed economic growth in the January-to-April quarter was 0.6%, which was weaker than economists had predicted. The estimate also was lower than government's first predictions which had initially suggested a 1.3% growth rate in the first quarter.
Even with sluggish economic growth, there was encouraging news that the labor market is still in good shape. The Labor Department said the number of new jobless claims filed last week fell by 4,000 to 310,000. It was the sixth weekly decline in jobless claims in seven weeks.
The Chicago Purchasing Management index showed business activity in the U.S. Midwest expanded at a much faster rate than expected on the back of a surge in new orders and stronger hiring.
Treasury prices fell on the Chicago PMI data, sending yields higher.
Investors were also encouraged about further consolidation in the banking sector after Wachovia agreed to buy A.G. Edwards. Wachovia said it will acquire A.G. Edwards for $6.8 billion in a cash and stock deal, which will form the second-largest retail stock brokerage in the U.S.
Shares of Dendreon surged after the biotechnology company announced it has satisfied the U.S. Food and Drug Administration's request for additional information on the effectiveness of a key cancer vaccine known as Provenge.
Motorola said it plans to shed a further 11% of its employees by the end of the year, as the world's second-largest mobile-phone maker attempts to return to profitability.
New York light sweet crude futures traded higher to $64 a barrel after an unexpected draw down in crude inventories. The Energy Department said crude oil supplies fell last week by two million barrels. The start of the hurricane season tomorrow also helped to boost oil.
European Stocks Close Higher
European indexes followed Asian markets higher as fears of a global correction, which were triggered by a slump in the Shanghai Composite index Wednesday, eased.
In Europe, the London FTSE-100, Paris CAC-40 and Frankfurt DAX all finished higher, with the FTSE CNBC Global 300 following the trend.
In corporate news, shares in E.ON gained following an announcement from the world's largest utility Wednesday that it planned to increase its share buyback program, raise its dividend and re-invest $80.53 billion.
And, GlaxoSmithKline defended its diabetes drug Avandia, which a report said was being shunned by U.S. doctors following a study linking the drug to heart attacks. GSK said it's too early to write off the medicine, but Shares continued to decline.
Meanwhile, Norwegian energy company Norsk Hydro posted a smaller-than-expected drop in first-quarter operating profit, boosted by strong results from its aluminum business. Shares gained.
Asian Markets Rally
Asian markets rallied across the board with South Korea closing over 2% higher hitting yet another record peak and China swinging back into positive territory after falling as much as 5% in the morning session.
Chinese stocks swung widely in volatile trade as small speculative stocks plunged further after Wednesday's hike in the share trading tax. The Shanghai Composite Index opened lower, rebounded into positive territory and then dropped sharply again. Selling focused on small-capital stocks favored by short-term speculators. But gains in many blue chips managed to push the index back into positive territory by the afternoon session. Oil refining giant Sinopec, one of the most heavily weighted stocks in the index, advanced.
Tokyo's Nikkei 225 Average posted its highest close in three months, climbing more than 1.6% with shares of technology firms such as Kyocera gaining. Shares of real estate investment firm Risa Partners advanced after the company's president told Reuters on Wednesday it is likely to buy an asset management or financial services company in the next three years to expand its business.