Hi Everyone,
The stock market gained ground for the second day in a row, despite a steep late-session dip, as better-than-expected ISM services PMI and the continued “flattening” of the COVID-curve boosted investor confidence. The Dow was up 133 or 0.6%, to 23,884, the Nasdaq gained 98, or 1.1%, to 8,809, while the S&P 500 rose by 26, or 0.9%, to 2,864. Advancing issues outnumbered decliners by a 2-to-1 ratio on the NYSE, where volume was relatively moderate.
Traders said that while today’s broad morning rally was impressive, market breadth notably deteriorated later on, as small-caps faltered. As one trader explained, “Apart from a brief period in early trading, small-caps and financials showed relative weakness today, just like yesterday, which likely means that investors remain wary of the outlook for the global economy.”
The late-day selloff started when Fed Vice Chair Richard Clarida stated that “…we are in a global recession” and that the current contraction is “the most severe in our lifetimes”, so it is no surprise that cyclical issues led the way lower. On a positive note, both the ISM manufacturing and services PMIs, two key forward-looking measures, came in well above the consensus estimates. It could mean that the recovery will be as quick as the contraction has been at least in the U.S. Mr. Clarida also reiterated that the Fed is ready to do more to support the recovery, which could support equities in the second half of the year.
Disney (DIS, -1.9%) reported mixed earnings just after the closing bell, with the company missing estimates on its bottom line, but slightly beating the Street’s revenue expectations. Disney’s stock hit its lowest level since 2014 in March, and even though its online entertainment segment benefited from the lockdowns, its legacy business still faces risks amid the reopening of the economy. Disney’s shares ticked higher in the wake of its report, which could help consumer-related issues tomorrow morning, when CVSA (CVS, +2.1%), Shopify (SHOP, +4.1%), and Barrick Gold (GOLD, +2.9%) will publish their quarterly numbers.
The German Constitutional Court voted on a complaint concerning the European Central Bank’s (ECB) quantitative easing (QE) program today, and even though the court did not rule against the key tool of the Central Bank, it demanded “clarification” regarding the effectiveness of the program. In itself, the ruling is unlikely to change the outlook for the Eurozone, as the QE program will likely continue. That said, since analysts think that the European financial system would need further stimulus measures to avoid a funding crisis, the decision sends a worrisome message for those who are hoping for so-called Coronabonds.
As always, have a great evening and stay tuned!!!
Joe
