By Christopher Whittall and Kenan Machado 

U.S. government bonds and their stock-market proxies gained Monday following some tepid U.S. economic data.

Meanwhile, technology stocks erased early gains, putting pressure on major U.S. stock indexes.

The Dow Jones Industrial Average rose 18 points, or less than 0.1%, to 21412. The S&P 500 added less than 0.1% and the Nasdaq Composite shed 0.4%.

Earlier Monday, data from the Commerce Department showed demand for long-lasting factory goods declined in May for the second straight month.

U.S. government bonds strengthened, sending the yield on the 10-year Treasury note down to 2.127%, according to Tradeweb, from 2.146% Friday. Yields fall as prices rise.

That spilled over into dividend-paying stocks. Utilities shares in the S&P 500 rose 1.2%, leading gains in the broader index.

Bank shares rose in the U.S. and Europe after Italian authorities said Sunday they were prepared to spend as much as EUR17 billion ($19.03 billion) as part of the shutdown of two regional banks.

The KBW Nasdaq Bank index of large U.S. commercial lenders rose 0.3% and the Stoxx Europe 600 banks subindex gained 1%. The Stoxx Europe 600 rose 0.4%.

Italian banks have been a concern for years, weighed down by bad loans, low profitability and insufficient capital. Their troubles have cast a shadow over the wider European banking system, which accounts for a large chunk of regional equity benchmarks.

"It is a very significant step," said Isabelle Mateos y Lago, chief multiasset strategist at BlackRock.

"If finally the issue of [bad loans in] the Italian banking system and overcapacity in some of the regional banks is being addressed, it is a very positive signal," she added.

Shares in Intesa Sanpaolo, which is set to buy the best assets of two troubled Italian lenders for a token fee, rose more than 4%. Shares in Italy's largest lender, UniCredit, gained more than 2%.

Elsewhere in Europe, food and beverage shares rallied following news that billionaire activist investor Daniel Loeb's Third Point hedge fund had taken a $3.5 billion stake in Nestlé. Shares in Nestlé added more than 4%.

The British pound rose slightly after the ruling Conservative Party reached an agreement with Northern Ireland's Democratic Unionist Party to support Prime Minister Theresa May's minority government. The pound was recently up 0.1% against the dollar at $1.2730.

Investors are looking ahead to a raft of inflation data out of Europe and the U.S. this week. Signs that inflation has softened have pushed down bond yields in recent weeks.

"We think we're in a bit of a goldilocks environment," said Ms. Mateos y Lago, with strong economic growth and lukewarm inflation. That means central banks shouldn't rush to raise interest rates, she said.

"Frankly, that is a great environment to be in risk assets globally," she said.

In Asia, the Shanghai Composite Index rose 0.9%, with Chinese stocks continuing to perform strongly following MSCI's decision to add them to its indexes. Gains there also helped boost Hong Kong equities on Monday. The Hang Seng Index rose 0.8%.

Meanwhile, Taiwan's tech-heavy Taiex index gained 1.3% to hit fresh 27-year highs.

In Japan, the Nikkei Stock Average rose 0.1%, with financial stocks weighing on the broader index. Signs that interest rates will remain low continue to weigh on Japanese financials, said Hisao Matsuura, chief strategist for equities at Nomura Japan.

Write to Christopher Whittall at christopher.whittall@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

June 26, 2017 12:08 ET (16:08 GMT)

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