Hi Everyone,
The stock market finished higher for the second day in a row following a hectic start to the week on Wall Street, as investors weighed the mixed COVID-related headlines. The Dow was up 158 or 0.6%, to 25,763, the Nasdaq gained 137, or 1.4%, to 9,726, while the S&P 500 rose by 25, or 0.8%, to 3,067. Advancing issues outnumbered decliners by a 3-to-1 ratio on the NYSE, where volume was moderate.
Traders said that U.S. stocks showed resilience in the face of the global headwinds, the performance of small-caps really turning heads. As one trader explained, “The Russell 2000 traded close to limit down overnight, meaning that small-cap index was on track to shed 5%, but it finished the session more than 2% higher, which points to massive buying in the more ‘risky’ sectors.”
The Fed’s corporate bond announcement gave a huge boost to equities toward the end of the session, despite the fact that the Central Bank already committed to purchasing bonds through certain ETFs. Direct purchases could be more selective, giving a helping hand to those companies most affected by the pandemic and the lockdowns. Analysts still expect a wave of bankruptcies in the latter half of the year, even in light of the relatively short lockdown period, and a second wave of outbreaks would make the Fed’s interventions even more crucial.
The Dow’s almost 1,400 point rally from its overnight low was nothing short of spectacular, and it could mean that the fears of a second wave in the U.S. were overblown, and stocks are ready to resume their historic recovery. The Nasdaq remains the strongest among the global large-cap indices despite last week’s turmoil. From a short-term perspective, the industrial average might provide more information about the general direction of the market. The most lockdown-sensitive issues set the trend in the past few weeks, together with small-caps, and should today’s reversal prove successful, bulls could soon be back in the driver’s seat.
While today’s big positive surprise in the Empire State Manufacturing Index didn’t shake the market, the fact that the sentiment regarding the economy improved so much could be great news from a long-term perspective. Economists fear a sustained drop in activity based on sentiment itself, and last month’s weak personal spending was not encouraging in that regard. The coming weeks’ trends will be crucial in judging the impact of the lockdowns, and apart from the COVID-related news flow, the “soft” sentiment-based measures will likely be at the center of attention.
As always, have a great evening and stay tuned!!!
Joe
