* U.S. manufacturing sector contracts in May -ISM
* Equity option market sentiment has turned from bullish to
cautious: Credit Suisse
* Merck shares rally early stage study of tumor drug
* Indexes mixed: Dow up 0.3 pct; S&P down 0.2 pct; Nasdaq
off 0.5 pct
By Angela Moon
NEW YORK, June 3 U.S. stocks were mostly lower
by late morning trade on Monday in a volatile session as
investors booked profits from a brief gain earlier that followed
lukewarm manufacturing data.
The S&P 500 fluctuated between losses and gains during most
of the morning, but the blue chips were outperforming the market
- of the 30 stocks on the Dow, 25 were trading higher, including
Merck & Co and Intel Corp.
"The near-term psychology of the equity market appears to be
inconsistent and inconclusive," said Terry Sandven, chief equity
strategist at U.S. Bank Wealth Management in Minneapolis, adding
that trading is likely to become more volatile.
"Today's (ISM) numbers were basically in line with
expectations, and will serve as a reason for the Fed to continue
to move towards tapering, (but only) in the latter part of the
third quarter or fourth quarter. But a consolidation period is
inevitable at these levels."
U.S. manufacturing activity contracted in May for the first
time in six months as new orders slipped and there was less
demand for exports, an industry report showed on Monday.
Trading has been volatile for the past week, with intraday
swings of 1 percent up or down, on concerns that the Fed may
reduce its monetary stimulus earlier than expected.
The Dow Jones industrial average was up 39.62 points,
or 0.26 percent, at 15,155.19. The Standard & Poor's 500 Index
was down 3.54 points, or 0.22 percent, at 1,627.20. The
Nasdaq Composite Index was down 16.44 points, or 0.48
percent, at 3,439.47.
A popular options gauge that measures the level of anxiety
in the market also showed a jump. The CBOE Volatility index VIX
was up more than 2 percent at 16.64.
"Equity option market sentiment has turned from bullish to
cautious, with VIX, skew, vol-of-vol (volatility of volatility),
and correlations all experiencing notable gains over the past
two weeks," said Mandy Xu, equity derivatives strategist at
In a week of heavy data, the most important will be the May
nonfarm payrolls report, scheduled for Friday. Reuters' survey
of analysts shows an expected 170,000 jobs added, slightly
higher than the previous 165,000. The Fed's Beige Book survey of
regional conditions is on tap for Wednesday.
In company news, Merck shares rose 5 percent to $49 after
the company's drug designed to unmask tumor cells and mobilize
the immune system into fighting cancer helped shrink tumors in
38 percent of patients with advanced melanoma in an early-stage
But F5 Networks Inc fell more than 5 percent to
$78.44 after Morgan Stanley downgraded the network gear maker to
"equal weight" from "overweight".