Wall St shakes off factory data; S&P, Nasdaq rise

US stocks edged higher, shaking off a surprise contraction in US manufacturing, which some investors took as a signal the Federal Reserve will take more forceful actions to boost the economy.

The Institute for Supply Management's June manufacturing index showed the factory sector suffered its first contraction since July 2009. The data from the world's biggest economy added to a picture of deteriorating business activity painted by similar surveys in Europe and China.

The Dow Jones industrial average was down 8.70 points, or 0.07 percent, at 12,871.39. The Standard & Poor's 500 Index was up 3.35 points, or 0.25 percent, at 1,365.51. The Nasdaq Composite Index was up 16.18 points, or 0.55 percent, at 2,951.23.

The next Fed policymaking meeting takes place July 31-August 1.

In Europe, equities climbed to a two-month closing high and looked poised to test new peaks in coming days as investors beefed up their anaemic holdings in anticipation of further policy action after a EU deal aimed at tackling the region's crisis last week.

The FTSEurofirst 300 ended up 1.4 percent at 1,035.32 points, building on a 2.6 percent jump on Friday, when EU leaders unveiled a crisis-fighting agreement, which, among other measures, allows the euro zone bailout fund to inject cash into struggling banks.

In Asia, Nikkei average retreated from an two-month intraday high to end almost flat on Monday after an early rally, spurred by an agreement to shore up Europe's troubled banks, faltered on concerns over exactly how it would stabilise euro zone banks.

The Nikkei ended at 9,003.48, almost unchanged, after hitting a two-month high of 9,103.79 at one point. The broader Topix index shed 0.1 percent to 769.34, after rising as high as 778.87.