The International Monetary Fund today pared its growth forecast for the US economy this year.

It also warned against a "fiscal cliff" at year-end and the Obama administration's proposed spending cuts.

The IMF estimated 2012 US economic growth at 2%, down from April's forecast of 2.1%.

It said that the outlook was at risk if the euro zone debt crisis worsens.

The outlook followed better-than-expected data on factory orders which saw US markets rise.

The Commerce Department said new orders for manufactured goods rose 0.7% during May. Economists had forecast orders rising 0.2%.

Trading is expected to remain volatile on low volume as U.S. stock markets close early ahead of the Independence Day holiday on Wednesday. Volume is likely to start building up from early Thursday, ahead of Friday's non-farm payrolls data.

A US ISM manufacturing report on Monday, whose main index registered a contraction in the sector for the first time since July 2009, boosted speculation that the Federal Reserve will announce it will embark on a third round of asset purchases, known as 'QE3', perhaps as soon as the central bank's next policy meeting from July 31 to August 1.

The Dow Jones industrial average was up 0.17%, at 12,892.92. The Nasdaq Composite Index was up 0.25% at 2,958.71.