Hi Everyone,
The major indices all finished higher today, but the Nasdaq clearly lagged behind the other two benchmarks amid the continued reopening optimism. The Dow was up 530 or 2.2%, to 24,995, the Nasdaq gained 16, or 0.2%, to 9,340, while the S&P 500 rose by 36, or 1.2%, to 2,992. Advancing issues outnumbered decliners by a more than 5-to-1 ratio on the NYSE, where volume was moderately heavy.
Traders said that the fact that small-caps continued to show relative strength means that the advance is finally broadening on Wall Street. As one trader explained, “The Russell 2000 surged to a fresh ten-week high, together with the major indices, and small-caps together with the key cyclical sectors would serve as a much more sustainable leadership than the handful of mega-cap tech stocks that spearheaded the post-crash rally.”
While the World Trade Organization (WTO) warned several times that the global reopening push might be premature, so far, the signs are encouraging both in the U.S. and internationally. The Memorial Day Weekend clearly led to an improvement in investor sentiment. Since most economic indicators have already been providing positive surprises, the recovery could gain steam in the coming weeks. Today’s new home sales number blew away even the most optimistic forecasts, and despite the slightly weaker-than-expected CB consumer confidence number, the U.S. could roar back in the third quarter.
The Trump Administration continues to ramp up its diplomatic assault on China, in the wake of last week’s escalation, and today, another unconfirmed report caused a late-session dip in stocks. Bloomberg’s report claimed that the U.S. Treasury is contemplating transaction controls and asset freezes against Chinese officials due to the country’s planned new security law targeting Hong Kong. Although China has not directly retaliated to the recent U.S. steps, this development could change that, and another open trade conflict would pose a threat to the post-COVID recovery.
European stocks, and the battered financial sector, in particular, got a huge boost from the news that the European Union (EU) will unveil its new stimulus package tomorrow. All twenty-seven member states will still have to ratify the rumored $550 billion package, but the formal announcement would already be a historic step. The plan will be released overnight, and since the details are not yet known, U.S. index futures could be in for a wild ride again.
As always, have a great evening and stay tuned!!!
Joe
