NEW YORK (CNNMoney.com) -- Stocks advanced Monday, the first business day of the new quarter, as a set of reports pointing to slowing economic growth pleased investors worried about inflation.

The Dow Jones Industrial average (up 77.80 to 11,228.02, Charts) rose about 0.7 percent. The broader Standard & Poor's 500 (up 9.99 to 1,280.19, Charts) index and the Nasdaq composite (up 18.34 to 2,190.43, Charts) both gained about 0.8 percent.

The stock and bond markets closed early Monday, and futures markets are closed for the day.

All U.S. financial markets will be closed Tuesday for the Fourth of July holiday.

In economic news, a key report showed manufacturing growth unexpectedly cooled in June. (Full story)

The Institute for Supply Management said its index of manufacturing activity fell to 53.8 in June from 54.4 in May. Economists surveyed by Briefing.com had expected the reading to rise to 55.

A reading above 50 points to growth in the sector.

Investors also took in a report that pointed to more slowing in the housing sector. The government said construction spending fell 0.4 percent in May. Economists were expecting spending to increase 0.2 percent.

Lately in the stock market, investors worried about rising inflation have cheered signs of cooling economic growth. Others, meanwhile, have worried that growth is slowing too quickly.

Those concerned about inflation appeared to dominate the market Monday, as the weaker-than-expected readings soothed their concerns.

"In a sense it's good that the numbers came in a little softer because it allows the market to believe the Fed is close to done [with its rate hikes]," Charles Lieberman, chief investment officer of Advisors Capital, said.

In corporate news, the Big 3 automakers began reporting their monthly U.S. sales figures.

Shares of Ford (down $0.22 to $6.71, Charts) fell 3 percent after the No. 2 automaker said U.S. sales fell 7 percent in June.

DaimlerChrysler (up $0.20 to $19.49, Charts) said its U.S. vehicle sales fell 13 percent during the month, but shares edged higher.

After the market close, crosstown rival General Motors said its June sales sank 25.9 percent.

Among the Dow 30, 25 components rose while five fell.

GM (down $0.38 to $29.41, Charts) was among the decliners, down 1 percent, after surging nearly 9 percent Friday. Investor Kirk Kerkorian is pressing the No. 1 automaker to consider a three-way partnership with Nissan Motor Corp. and Renault SA.

Nissan's board approved exploratory talks about a potential three-way alliance, Reuters reported. The board of Renault is set to meet Monday to discuss the tie-up plan.

Shares of Wal-Mart (down $0.60 to $47.57, Charts), the world's largest retailer, fell 1 percent after the company said its U.S. sales likely rose 1.2 percent in June, the low end of its forecast range.

Citigroup (up $0.72 to $48.97, Charts) shares rose 1.5 percent after CEO Charles Prince rejected the notion of breaking up the financial services giant, according to a report in Barron's newspaper published over the weekend.

Elsewhere, shares of crafts retailer Michaels Stores (up $0.97 to $42.21, Charts) rose 2 percent. The company agreed on Friday to sell itself to two private equity groups for more than $6 billion.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by a margin of three to one on volume of 742 million shares. On the Nasdaq, advancers topped decliners by a margin of four to three as 746 million shares changed hands.

On the commodities front, London Brent crude fell 7 cents to $73.44 a barrel.

The market for U.S. light crude oil and COMEX gold was closed for the holiday.

Treasury prices edged lower, lifting the yield on the benchmark 10-year note to 5.15 percent, up from 5.14 percent late Friday. Bond prices and yields move in opposite directions.

In currency trading, the dollar was little changed against the euro and edged higher versus the yen.

In global trade, Japan's benchmark Nikkei stock average hit a four-week high, and European shares finished the session higher.

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