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S&P 500 Closes at 10-Week High on Vaccine Hopes, Stimulus Pledge

S&P 500 Closes at 10-Week High on Vaccine Hopes, Stimulus Pledge
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Monday, 18 May 2020 04:06 PM

U.S. stocks jumped on Monday, and the S&P 500 closed at a 10-week high, on encouraging early-stage data for a potential coronavirus vaccine and on the promise of more stimulus to lift an economy beaten down by the pandemic.

Drugmaker Moderna Inc surged 19.96% after the company said its experimental COVID-19 vaccine showed promising results in a small early-stage trial.

After rallying more than 32% from a multi-year low hit in March, the S&P 500 had been trading in a tight range in May as investors weighed the hopes of an economic recovery against the fears of another wave of infection as states lifted virus-led restrictions.

"The fact that Moderna came out with the Phase 1 trial that seems to be positive, that certainly is igniting the storm," said Ken Polcari, chief market strategist at SlateStone Wealth LLC in Jupiter, Florida. "That will ignite the storm because if there is a vaccine then all this uncertainty about the economy and the virus goes away."

Stocks that have been particularly battered by government lockdown measures implemented to stem the spread of the coronavirus surged on Monday.

Travel-related stocks were among the biggest gainers, with cruise line operators Carnival Corp, Royal Caribbean Cruises Ltd and Norwegian Cruise Line Holdings Ltd all outperforming the broader market with gains of at least 15%.

Airline stocks also soared as Delta Air Lines said it would resume flying several major routes in June. The NYSE Arca index gained 14.14%, with Delta up 13.91%.

The Dow Jones Industrial Average rose 911.95 points, or 3.85%, to 24,597.37, the S&P 500 gained 90.21 points, or 3.15%, to 2,953.91 and the Nasdaq Composite added 220.27 points, or 2.44%, to 9,234.83.

The benchmark S&P 500 notched its biggest one-day percentage gain since April 8, with all 11 major S&P sectors higher.

Markets also took heart from comments by Federal Reserve Chair Jerome Powell over the weekend forecasting a gradual economic recovery and his affirmation that more monetary stimulus would be on the way if required. Powell is set to speak before the Senate Banking Committee on Tuesday to discuss how economic rescue efforts are working.

Cyclical plays were in favor with the energy and industrial sectors climbing as a gradual recovery in economic activity pointed to more demand for oil and manufactured products.

Still, stocks that are poised to benefit the most from a restart of the economy continue to lag those whose businesses have weathered the restrictions or even grown as a result of the lockdowns. The S&P 500 growth index has outperformed the S&P value index by about 4 percentage points this month.

General Motors Co and Ford Motor Co both surged, closing up 9.63% and 8.37%, respectively, as the two automakers started to reopen their North American factories in a push to restart work in an industry that accounts for about 6% of U.S. economic activity and employs nearly 1 million people in the United States.

Advancing issues outnumbered declining ones on the NYSE by a 7.12-to-1 ratio; on Nasdaq, a 4.43-to-1 ratio favored advancers.

The S&P 500 posted 22 new 52-week highs and no new lows; the Nasdaq Composite recorded 88 new highs and seven new lows.

Volume on U.S. exchanges was 12.63 billion shares, compared to the 11.4 billion average for the full session over the last 20 trading days. 

GLOBAL MARKETS

A gauge of global equity markets surged almost 3% and oil rallied to highs last seen in mid-April as data from an early-stage trial for a coronavirus vaccine lifted hopes of a faster recovery from the pandemic-driven economic slump.

Warm weather enticed people in countries across the world to emerge from coronavirus lockdowns as centers of the outbreak from New York to Italy and Spain gradually lift restrictions that have kept millions cooped up for months.

Investors have cheered any positive development by drugmakers' vaccine trials amid fears of a second wave of infections as restrictions are eased.

A workable vaccine that can be mass-produced by year-end or early 2021 would be a "game-changer" for industries whose challenges may not be resolved by the economy's reopening, said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

Global economic output will take two or three years to recover to pre-pandemic levels, IHS Markit said in a note, projecting worldwide gross domestic product would fall 5.5% in 2020, or three times the contraction of 2009 after the global financial crisis.

Under the best of circumstances, it will be a long road for the U.S. economy to recover, with additional job losses likely through June, Federal Reserve Chairman Jerome Powell said in an interview on Sunday.

MSCI's gauge of stocks around the globe gained 2.90%, its biggest single-day percentage gain since April 6 when it jumped 5.5% after signs the death toll from the coronavirus was slowing in Europe.

The pan-European STOXX 600 index closed up 4.1%, its biggest one-day percentage gain since March 24.

Germany's auto-heavy DAX index surged 5.7% to its highest level in more than two weeks, while France's main CAC 40 index rose 5.2%. The two countries called for the creation of a European Recovery Fund worth 500 billion euros ($544 billion) to help the region quickly exit the crisis.

The deal, described by French President Emmanuel Macron as a major step forward, seeks to break the impasse over joint euro debt and act as a blueprint for a wider European Union agreement. The euro rose on the news.

"The resilience of stock markets relative to the awful economic data that we've been seeing over the past fortnight speaks to an optimism that ... as economies come out of lockdown we can expect to see improvements as we head into the second half of the year," said Michael Hewson, chief market analyst at CMC Markets.

Japan's preliminary GDP data showed that the world's third- biggest economy contracted an annualized 3.4% in the first quarter, slipping into recession for the first time in more than five years.

Hopes of a worldwide economic recovery lifted oil prices, with prices settling 7%-8% higher, supported by output cuts.

"Optimism on the demand side of the oil equation has helped prices climb further, with gasoline demand coming back as governments ease confinement measures," said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu.

U.S. crude added $2.39 to settle at $31.82 a barrel, while Brent, the international benchmark, rose $2.31 to settle at $34.81 a barrel.

The jump in oil prices lifted commodity currencies such as the Norwegian crown and the Canadian dollar against the U.S. dollar.

The dollar index fell 0.771%, with the euro up 0.93% to $1.0916. The Japanese yen weakened 0.26% versus the greenback at 107.33 per dollar.

Italian government bond yields fell to their lowest level in over a month on the proposed Franco-German recovery fund.

Benchmark 10-year U.S. Treasury notes fell 26/32 in price to push their yield up to 0.7224%.

Gold retreated from a more-than seven-year high as stocks and oil surged. U.S. gold futures settled 1.3% lower at $1,734.40 an ounce.

Gold traded sideways "because everybody is thinking 'risk-on,' get into equities - as markets across the board are up 3%," said Michael Matousek, head trader at U.S. Global Investors. But the trend "is still to the upside, there's still plenty of reason to buy gold."

© 2020 Thomson/Reuters. All rights reserved.


   
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U.S. stocks jumped on Monday, and the S&P 500 closed at a 10-week high, on encouraging early-stage data for a potential coronavirus vaccine and on the promise of more stimulus to lift an economy beaten down by the pandemic.
wall street, stock, markets, dow, virus
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2020-06-18
Monday, 18 May 2020 04:06 PM
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