U.S. shares close higher in holiday shortened trade; Dow up 0.56%

Investing.com - U.S. stocks closed sharply higher Tuesday, on a holiday shortened session,  as strong U.S. factory orders data lifted shares amid growing expectations for further easing measures by central banks.

At the close of U.S. trade, the Dow Jones Industrial Average eased up 0.56%, the S&P 500 index added 0.62% while the Nasdaq Composite index climbed 0.84%

Lifting shares, U.S. factory orders rose more-than-expected in May, increasing for the first time in three months, official data showed on Tuesday. 

In a report, the U.S. Census Bureau said factory orders rose by a seasonally adjusted 0.7% in May, above expectations for a 0.2% gain. 

Factory orders in April fell by 0.7%. The figure was revised from a previously repotted decline of 0.6%..

In bearish news, the Institute for Supply Management said its index of U.S. manufacturing activity dropped to 49.7 in June, falling below the 50 level which separates contraction from expansion for the first time since July 2009, from 53.5 in May.

The weak data increased the chances that the U.S. central bank may implement a third round of quantitative easing to shore up economic growth, which has been hit by the ongoing debt crisis in the euro zone.

In addition, investors were looking ahead to the outcome of the European Central Bank’s monetary policy meeting on Thursday, amid growing expectations for a rate cut.

Auto makers were broadly higher, led by Ford, up 3.09%, after the company posted monthly auto sales of 7%, topping expectations. Rivals GM and Toyota gained 2.40% and 0.54% respectively and were slated to report results later in the day.

In the tech sector, Microsoft saw shares drop 0.87% after admitting its largest acquisition in the Internet sector was worthless and wiped out any profit for the last quarter.

The software giant said it is preparing to record a hefty USD6.2 billion write-down in its fourth quarter, mostly due to the disappointing performance of online advertising company aQuantive, which it acquired five years ago. 

Research In Motion also retreated 1.37% after Barclays cut its rating on the BlackBerry maker to "underweight" from "equal weight."

Meanwhile, Apple shares rose 0.48% after a U.S. judge on Monday rejected a request by Samsung Electronics to lift a ban on U.S. sales of its Galaxy Tab 10.1, marking another setback for the South Korean firm in its tablet patent battle with the iPad maker.

Elsewhere, financial stocks were mixed, as shares in Goldman Sachs climbed 0.50% and Citigroup rose 0.29%, while Bank of America added 0.25% and JP Morgan tumbled 0.99%. 

Barclays lost 0.37% after Chief Executive Bob Diamond quit with immediate effect earlier Tuesday over an interest-rate-rigging scandal, becoming the highest-profile victim so far in a probe that spans a dozen major banks across the world.

Also on the downside, Morgan Stanley fell 0.27%, after investors claimed that the U.S. bank successfully pushed Standard & Poor’s and Moody’s Investors Service to give unwarranted investment-grade ratings in 2006 to USD23 billion worth of notes backed by subprime mortgages, according to a Bloomberg report.

The unsealing of the internal documents from Moody’s and Standard & Poor’s came in one of the largest ratings lawsuits to emerge from the 2008 financial crisis.

During European afternoon trade, the EURO STOXX 50 soared 1.24%, France’s CAC 40 added 0.96%, while Germany’s DAX 30 jumped 1.26%

U.S. markets are closed Wednesday in observance of the July 4th holiday.