NEW YORK, June 5 (Reuters) - Mid- and small-cap stocks were higher on Tuesday as data showing the U.S. services sector grew slightly faster than expected in May helped allay concerns about the economic recovery.
The pace of growth in the U.S. services sector picked up in May as a gauge of new orders improved, according to an industry report. The Institute for Supply Management’s services index edged up to 53.7 in May from 53.5 in April, a touch above economists’ forecast for it to hold steady.
Investors may have also been tempted by a string of losses which made beaten-down stocks more attractive. The gains helped put the S&P MidCap 400 and SmallCap 600 indexes on track for their first advance in five sessions, although both indexes remained mired near five-month lows.
“This market has got to learn and digest that we are in for protracted, long-term low growth,” said Michael E. Hoffman, Director of Research, Wunderlich Securities, Inc in Baltimore.
“If you think that way and start looking through the list of good companies that don’t need a cyclical recovery, they just need some stable growth, there are some cheap stocks out there.”
The S&P MidCap 400 index gained 1 percent while the S&P SmallCap 600 index climbed 0.6 percent. In comparison, the benchmark S&P 500 rose 0.4 percent.
Plantronics Inc was among the best performers on the MidCap index, up 6.7 percent to $30.90 after Mizuho Securities boosted its rating on the headset maker to “buy” from “neutral.”
But smallcap Shuffle Master Inc plunged 15 percent to $12.12 after posting second-quarter earnings that missed Wall Street expectations. Roth Capital Partners subsequently cut its price target on the casino gaming device maker by $3 to $15. (Editing by James Dalgleish)