Wall Street gains buoy stocks in light May Day trading; oil falls

NEW YORK (Reuters) - Shares of the largest U.S. companies hit record highs on Monday, lifting Wall Street and a gauge of key world equity indexes, while data on U.S. drilling and output kept downward pressure on oil prices.

Global trading was light, with some markets in Europe and Latin America closed for the May Day holiday, while Japan was open overnight during a shortened trading week.

Data showed U.S. manufacturing activity slowed in April while consumer spending was unchanged in March and a key inflation measure recorded its first monthly drop since 2001. Despite the soft data, traders continued to see a 7-in-10 chance that the Federal Reserve will hike interest rates in June.

On Wall Street, Apple and other large technology companies led the way, sending the Nasdaq Composite to a record high. Apple is due to report its earnings on Tuesday, while Facebook will report on Wednesday.

So far in this earnings season, reported and expected profits at S&P 500 companies are estimated to have risen 13.6 percent in the first quarter, the most since 2011, according to Thomson Reuters I/B/E/S.

"This is shaping up to be the strongest earnings season in several years," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

"That has kind of got people gravitating back to equities and gravitating to the equities that are doing well."

Shares of the largest five U.S. companies by market capitalization, Apple , Alphabet , Microsoft , Amazon and Facebook hit intraday or closing highs - or both - on Monday.

The Dow Jones Industrial Average <.dji> fell 27.05 points, or 0.13 percent, to close at 20,913.46, the S&P 500 <.spx> gained 4.13 points, or 0.17 percent, to 2,388.33 and the Nasdaq Composite <.ixic> added 44.00 points, or 0.73 percent, to 6,091.60.

MSCI's gauge of stocks across the globe <.miwd00000pus> gained 0.22 percent.

Emerging market stocks <.mscief> rose 0.18 percent. MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> closed 0.32 percent higher, while Japan's Nikkei <.n225> rose 0.59 percent.

Stocks briefly pared gains midway through the U.S. session after U.S. President Donald Trump said in an interview with Bloomberg he is actively considering breaking up the largest U.S. banks, but the losses were quickly reversed.

Oil slipped 1.2 percent as rising output in Libya and increased U.S. drilling countered OPEC-led production cuts.

"With four months of the cutting in effect we haven't seen a sizable reduction in global oil fuel inventories," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut. "It's not sizable enough to see some proof, and the market is having trouble holding most of its gains since 2016."

U.S. crude fell 1.22 percent to $48.73 per barrel and Brent was last at $51.43, down 1.19 percent on the day.

Crude prices were also pressured by data showing that growth in Chinese manufacturing slowed faster than expected in April.

The weak U.S. data initially weighed on the dollar, but moves among major currencies were relatively small. The dollar index <.dxy> rose 0.1 percent, with the euro up 0.03 percent to $1.0898.

The Japanese yen weakened 0.27 percent versus the greenback to 111.86 per dollar , while sterling was last trading at $1.2884, down 0.48 percent on the day.

U.S. Treasury debt prices fell in thin volume, pressured by Treasury Secretary Steven Mnuchin saying the government is looking into the issuance of ultralong-term bonds, or those with maturities beyond 30 years.

Benchmark 10-year notes last fell 11/32 in price to yield 2.3216 percent, from 2.282 percent late on Friday. The 30-year bond last fell 1-1/32 in price to yield 3.0038 percent.

Spot gold dropped 0.9 percent to $1,256.66 an ounce. U.S. gold futures fell 0.84 percent to $1,257.60 an ounce.

Copper rose 0.76 percent to $5,735.50 a tonne.

(Additional reporting by David Gaffen, Lewis Krauskopf, Sam Forgione and Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama and James Dalgleish)