Tags: wall street | stock | markets | dow | economic | revival

Dow Gains 550 Points on Economic Hopes as Bank Stocks Jump

Dow Gains 550 Points on Economic Hopes as Bank Stocks Jump

Wednesday, 27 May 2020 04:05 PM

U.S. stocks rose on Wednesday, with the S&P 500 closing above 3,000 for the first time since March 5, as the further easing of lockdowns lifted optimism for an economic recovery.

Bank stocks powered the day's advance, with the S&P 500 financial index leading gains among major sectors. The index rose nearly 10% over the past two sessions for its biggest two-day increase since April 8-9.

Shares of JPMorgan Chase & Co was the leading gainer in the financial index, rising 5.8% as the stock surged for a second day in a row. The bank's chief executive, Jamie Dimon, said Tuesday he expects JPMorgan will boost its credit reserves again in the second quarter, but said there are signs the economy is regaining its footing.

Continued easing of lockdowns, optimism about an eventual COVID-19 vaccine and massive U.S. stimulus have been driving the market's recent gains. On Wednesday, Walt Disney Co announced plans to begin reopening its Walt Disney World resort in Florida, the world's largest theme park, in phases beginning July 11, and MGM Resorts said it would reopen its four Las Vegas casinos on June 4.

"It's all about liquidity and the hopes that the economy will eventually do well," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

"The rally will continue, but I don't think it will continue without pullbacks," he said, noting that weak second-quarter earnings could give investors a "reality check."

Tech-related shares underperformed the broader market on Wednesday after leading the recent rally.

The Dow Jones Industrial Average rose 553.16 points, or 2.21%, to 25,548.27, the S&P 500 gained 44.36 points, or 1.48%, to 3,036.13, and the Nasdaq Composite added 72.14 points, or 0.77%, to 9,412.36.

Amid the recent gains, U.S. tensions with China have cast a cloud on markets.

President Donald Trump said Tuesday that Washington would announce its response to China's planned national security legislation on Hong Kong before the end of the week. Secretary of State Mike Pompeo said Wednesday that Hong Kong no longer warrants special treatment under U.S. law as it did when it was under British rule, potentially a big blow to its status as a major financial hub.

Tech-related shares are among the most sensitive to Chinese growth, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis.

"If the market is going to go higher from here, you're going to have to have broader participation, but you are going to need those large-cap tech companies to be along for the ride because they make up such a large portion of the benchmark," Samana said.

Also on Wednesday, the Federal Reserve's Beige Book report showed that U.S. businesses continued to be hammered by the effects of the novel coronavirus epidemic into the middle of May.

Advancing issues outnumbered declining ones on the NYSE by a 3.81-to-1 ratio; on Nasdaq, a 2.21-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and no new lows; the Nasdaq Composite recorded 41 new highs and 10 new lows.

Volume on U.S. exchanges was 12.86 billion shares, compared to the 11.33 billion average for the full session over the last 20 trading days. 

GLOBAL STOCKS

Equity markets rallied on Wednesday, lifted by enthusiasm for the European Union's plans for a 750 billion euro ($823 billion) recovery fund, but crude prices slid on concerns about unrest in Hong Kong over Beijing's proposed national security laws.

The euro edged higher against the dollar on the European Commission's proposed stimulus plan to bolster economies ravaged by the coronavirus pandemic, which boosted risk appetite and reduced demand for safe-haven bonds and gold.

The commission's plan also includes 1.1 trillion euros for the EU's next long-term budget that would contribute to the recovery fund that is aimed especially at Italy and Spain.

News of the plan underpinned a broad market rally in Europe as bank stocks, which typically rise or fall on the economic outlook, provided the biggest boost to equities. Euro zone banks climbed 4.8%, with French lenders BNP Paribas SA and Societe Generale SA leading gains.

The banking sector also performed well on Wall Street. Bank of America and JP Morgan Chase & Co led the U.S. banking sector up 3.31%.

Equities are being driven by large flows of money entering the economy, said David Kelly, chief global strategist at JPMorgan Asset Management.

"You got a huge amount of liquidity with nowhere to go," Kelly said.

However, the market is assuming more positive economic news than is going to occur this year and well into next, he said.

"We will see a start of a recovery, but it shouldn't be misinterpreted," Kelly said. "We're not going to get back to full employment or even an unemployment rate below 10% any time this year, and maybe it will take most of next year."

MSCI's gauge of stocks across the globe gained 1.03%, while the pan-European STOXX 600 index closed up 0.24%.

Tech heavyweights Amazon.com, Microsoft Corp and Facebook Inc weighed on the Nasdaq, while healthcare and technology stocks weighed on the S&P 500. Technology and healthcare have outperformed during the coronavirus-led market slump.

U.S. Secretary of State Mike Pompeo said he had certified Hong Kong no longer warrants special treatment under U.S. law as it did under British rule, the latest salvo at China's plans to impose new security legislation on the territory.

President Donald Trump now must decide to end some, all or none of the U.S. economic privileges that Hong Kong enjoys.

Crude prices slid on the news as a resurgent U.S.-Sino stand-off could weigh on global businesses and oil demand, which already has been hit by the coronavirus pandemic. Concerns about the pace of recovery also drew the attention of investors.

U.S. crude settled down 4.48% to $32.81 per barrel and Brent settled at $34.74, down 3.95% on the day.

The euro has struggled since falling in March, when investors rushed for the safety of dollars. But analysts say the recovery fund proposals, if they can win over EU members skeptical of an earlier Franco-German plan, could push the euro higher.

The dollar index was flat, with the euro up 0.16% to $1.0998. The Japanese yen weakened 0.19% versus the greenback at 107.78 per dollar.

MSCI's ex-Japan Asia-Pacific index fell 0.4% overnight as Hong Kong and mainland China shares extended declines. Hong Kong's Hang Seng fell 1.0% and mainland shares were down 0.8 amid fears protests would worsen antagonism between the United States and China.

Benchmark 10-year notes fell 2.6 basis points to yield 0.6819%.

© Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


StreetTalk
U.S. stocks rose on Wednesday, with the S&P 500 closing above 3,000 for the first time since March 5, as the further easing of lockdowns lifted optimism for an economic recovery.
wall street, stock, markets, dow, economic, revival
1095
2020-05-27
Wednesday, 27 May 2020 04:05 PM
Newsmax Media, Inc.
 
Newsmax TV Live
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved