Yet, strong data also pressured bond prices, pushing their yields, which move inversely to price, much higher. The yield on the benchmark 10-year Treasury bond surpassed 5%, its highest level since mid-August.
"Our stock market has had a very meaningful move to the upside, at a 20% annual rate, and is arguably overvalued, especially if you consider the rise in bond yields," said Hugh Johnson, chairman of Johnson Illington Advisors.
On Monday, the 10-year bond rose 6/32 to 96 21/32, while its yield fell to 4.934% (TNX) , amid safe-haven buying from the Shanghai sell-off.
Should U.S. stocks finally halt their impressive rally this week, "it will either be that investors turn their attention to rocketing interest rates or it will have to come from Wednesday's economic release on productivity and unit labor costs," said Marc Pado, market strategist at Cantor Fitzgerald.
Bonds lost a bit of steam as Wall Street took Shanghai in stride.
There was limited reaction to news that factory orders rose 0.3% in April, below the 0.8% expected by economists surveyed by MarketWatch. Orders in March were revised up to 4.1% from 3.5% previously, putting the level of orders close to expectations.
The government also said that businesses boosted their capital spending in April at a faster pace than previously reported.
After the data, the dollar remained weaker against rivals.
Crude oil prices rose $1.13 to $66.21 amid concerns that a tropical cyclone might enter the Persian Gulf on Wednesday.
Gold prices fell on profit taking, with June gold losing 50 cents to $670.70.
Deals to the rescue?
More deal-making developments helped provide some support for the market.
A meeting between the Bancroft family, which controls Dow Jones (DJ) , and Rupert Murdoch, whose company News Corp. (NYSE:NWS) (NWS) made a $5 billion bid for Dow Jones, is scheduled to take place on Monday.
Dominion (D) agreed to sell some U.S. gas and oil operations to Loews (NYSE:LTR) (LTR) for $4 billion and other operations to XTO Energy (NYSE:XTO) (XTO) for $2.5 billion.
Avaya (NYSE:AV) (AV) rose almost 4% after The Wall Street Journal reported it is close to a deal to be bought by TPG Capital and Silver Lake Partners for $17 a share, the newspaper added, citing people familiar with the matter.
Health Care Properties (HCP) agreed to buy U.S. biotech real estate from Britain's Segro for $2.9 billion. Qiagen (QGEN) agreed to buy Digene (NASDAQ-NMS:DIGE) (DIGE) for $1.6 billion in cash and stock.
AXA (AXA) agreed to sell a Dutch unit for $2.35 billion to SNS Reaal of Holland.
Subprime mortgage firm Accredited Home Lenders Holding Co. (NASDAQ-NMS:LEND) (LEND) said it agreed to be acquired by Lone Star Fund V L.P. for about $400 million, or $15.10 a share, in an all-cash deal.
Corporate news
Investors in the pharmaceutical industry were paying close attention the American Society of Clinical Oncology meeting in Chicago.
Roche (RHHBY) , the majority owner of Genentech (NYSE:DNA) (DNA) , fell in Swiss trading on concerns about Avastin's colorectal cancer performance as well as that a lower-dose Avastin version showed improved survival in lung cancer. Bayer (BAY) rose in Germany after it and Onyx (ONXX) reported improved survival from patients taking a liver cancer drug.
Onyx gained 9.5%.
Early-stage trials from Arqule (NASDAQ-NMS:ARQL) (ARQL) and Exelixis (NASDAQ-NMS:EXEL) (EXEL) showed "impressive" response rates, according to analysts at Rodman & Renshaw.
(END) Dow Jones Newswires (NYSE:DJ) 06-04-07 1715 Copyright (c) 2007 Dow Jones & Company, Inc.
