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Stocks close mildly higher amid mixed data; airlines boost transports 1%

U.S. stocks closed slightly higher on Monday, the first day of trade for June, as investors found some encouragement from mixed second-quarter economic reports. ( Tweet This )

The major indices pared afternoon gains to end mildly higher after earlier fluctuating around the flatline. The Dow Jones industrial average closed up about 30 points, after briefly topping an opening gain of 92 points.

"I think the market today is a domestic industrial growth story," said Jack Ablin, chief investment officer at BMO Private Bank. "Consumers are still not spending money."

Morning data showed consumer spending was flat month-over-month, while construction spending hit a nearly 6-1/2-year high.

Utilities and industrials were among the leading sectors in the S&P 500. The Russell 2000, often considered a proxy on the domestic market, gained about 0.3 percent as the dollar advanced.

The Dow transports closed up 1.14 percent, with airlines helping the index reverse a recent decline. The index is down about 8 percent for the year.

"I think you have a situation where the economy is growing fast enough to placate market participants but not so quickly to bring the Fed in," said Ben Pace, chief investment officer at HPM Partners.

Stocks held to a trading range in choppy trade Monday. "We have a lot of data giving somewhat conflicting stories," said Ben Garber, capital markets economist at Moody's Analytics. He noted the counter effect of continued weakness in consumer spending.

There are "concerns that the economy is not bouncing back as much in the second quarter as people expected," he said.

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The Institute for Supply Management (ISM) said its index of national factory activity was 52.8 in May, up from April's reading of 51.5, which had tied with March's reading as the lowest since May 2013.

Construction spending for April increased 2.2 percent, the highest level in nearly six-and-a-half years.

The May manufacturing PMI index came in at 54.0, slightly above the initial read of 53.8 and little changed from April's 54.1 report.

Peter Cardillo, chief market economist at Rockwell Global Capital, highlighted the improvements in housing and manufacturing data.

"Two important sectors of the economy continue to shine," he said. "The economy seems to be headed for recovery in his quarter—modest growth."

The Atlanta Fed's GDP Now forecast remained unchanged from May 26 at 0.8 percent after the morning's data. The forecast for real consumption growth fell to 2.1 percent from 2.6 percent.

Futures held gains after personal income increased 0.4 percent in April. Consumer spending was unchanged from the prior month.

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"The sweet spot for the market is something similar to what we saw today—growth is picking up but not going to stoke inflation," said Jeremy Zirin, head CIO investment strategist at UBS Wealth Management Americas.

The U.S. 10-year yield gained to 2.19 percent, while the 2-year yield traded near 0.64 percent. The U.S. dollar traded half a percent higher with the euro below $1.10.

Monday's economic reports kick off a week of data. ISM non-manufacturing is expected Wednesday, while Friday brings the key nonfarm payrolls report.

"I think investors are treading very cautiously on the market here because there's a lot of conflict in the economic data," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

Housing reports have been mostly encouraging, while the overall economy still struggles to show robust growth.

"The market is concerned that if the economy can't grow with rates at zero, then when will it grow?" said Adam Sarhan, CEO of Sarhan Capital. He said Monday's better-than-expected reports still show an economy below robust levels.

Stocks briefly rose in the open following morning remarks from Federal Reserve policymakers.

Financial regulators need to be on guard against the threat of future financial crises, particularly as banks boost pressure to roll back rules designed to shore up the financial system, Fed Vice Chairman Stanley Fischer said at the International Monetary Conference in Toronto. He added that it is unclear if we're in secular stagnation, and warned against complacency bred from financial stability.

Separately, Boston Fed President Eric Rosengren said Monday that he would like to begin raising rates as soon as possible, but risks from the slowdown in China and Europe in particular loom large even as growth at home is still not strong enough.

European stocks closed mixed on weaker-than-expected factory growth amid strength in health care stocks. The Shanghai Composite surged following a slight improvement in China's PMI reports.

U.S. equities posted gains for May despite closing lower on Friday.

Investors continue to eye Greece, which faces a June 5 deadline for a payment to the International Monetary Fund.

European Central Bank President Mario Draghi and IMF chief Christine Lagarde will join the leaders of Germany, France, and the European Commission for talks on Monday evening in Berlin on Greece, European Union officials said.

The Dow Jones Industrial Average closed up 29.69 points, or 0.16 percent, at 18,040.37, with DuPont leading advancers and Intel the greatest laggard.

The S&P 500 closed up 4.35 points, or 0.21 percent, at 2,111.73, with industrials leading eight sectors higher and energy and telecommunications the only decliners.

The Nasdaq closed up 12.9 points, or 0.25 percent, at 5,082.93.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded just below 14.

About eight stocks advanced for every seven decliners on the New York Stock Exchange, with an exchange volume of 680 million and a composite volume of nearly 3 billion in the close.

Crude oil futures for July delivery settled down 10 cents at $60.20 a barrel on the New York Mercantile Exchange. Gold futures for August delivery settled down $1.10 to $1,188.70 an ounce.

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Nobel Prize-winning economist Robert Shiller told CNBC on Monday that the U.S. Federal Reserve should consider lifting interest rates sooner than later, in order to tackle speculative bubbles in the housing and stock markets.

In corporate news, Intel agreed to buy Altera for $16.7 billion as the world's biggest chipmaker seeks to make up for slowing demand from the PC industry, Reuters said.

Walt Disney Chief Financial Officer James Rasulo will leave the post at the end of June, the company announced Monday.

Cisco Systems Presidents Rob Lloyd and Gary Moore are planning to leave the company on July 25, according to a report by Dow Jones. Llyod had been seen as a possible successor to CEO John Chambers, who in May named Chuck Robbins as the new CEO.

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Microsoft announced Windows 10 will be released on July 29. The company had previously said the updated operating system would be released "this summer."

Apple has filed for a potential yen-based note offering in 2020, with minimum denominations of 100 million yen. The total size of the possible offering was not disclosed in the Securities and Exchange Commission filing.

Bristol-Myers Squibb closed up 2.9 percent. The stock sank 6 percent on Friday after it unveiled findings for its immunotherapy Opdivo that disappointed investors.

Reuters and CNBC's Peter Schacknow contributed this report.

On tap this week:

Tuesday

Monthly vehicle sales

10:00 am: Factory orders

Earnings: Medtronic, Dollar General, Cracker Barrel

Wednesday

8:15 am: ADP payroll data

8:30 am: International trade

9:45 am: Services PMI

10:00 am: ISM nonmanufacturing

2:00 pm: Beige book

2:15 pm: Chicago Fed President Charles Evan at banking symposium

4:00 pm: St. Louis Fed President James Bullard on the economy, meets press

Earnings: Vera Bradley, Five Below, Brown Forman

Thursday

8:30 am: Initial claims

8:30 am: Productivity

12:00 pm: Fed Gov. Daniel Tarullo on economy

Earnings: JM Smuckers, Lands End, Joy Global, Ciena, Diamond Foods,Cooper Cos, Verifone

Friday

8:30 am: Employment report

12:30 pm: New York Fed President William Dudley on economy, Q&A

3:00 pm: Consumer credit

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