Hi Everyone,
The stock market had one of its strongest sessions ever, with the most-oversold sectors propelling the market higher, as investors put their faith in the historic $2.5 trillion stimulus bill that is likely to be approved by Congress later today. The Dow was up 2,113, or 11.4%, to 20,705, the Nasdaq gained 557, or 8.1%, to 7,418, while the S&P 500 rose by 210, or 9.4%, to 2,447. Advancing issues outnumbered decliners by a more than 10-to-1 ratio on the NYSE, where volume remained heavy.
Traders said that following yesterday’s “under-the-hood” improvements, namely the lower number of new 52-week lows, today’s rally was the broadest since the beginning of the rout. As one trader explained, “It seems that the monster stimulus package could trigger a rally that will be more than just a ‘one-day-wonder,’ but despite today’s encouraging breadth measures, it’s way too early to call a final bottom in stocks.”
The U.S. reported more than 10,000 new COVID-19 cases today, and since over a dozen U.S. states have issued stay-at-home orders, we can conclude that the U.S. and New York, in particular, is now the epicenter of the pandemic. The world’s second-most-populous country, India is now also under lockdown, for three weeks, together with the U.K., and even though the situation in Italy continues to improve slowly, most of Europe remains at a standstill. The total number of cases topped 400,000 globally, so despite today’s shift in investor sentiment, the pandemic is far from being over.
Today’s European services PMIs, together with the Markit U.S. PMI, were nothing short of disastrous, with several measures hitting record lows as Europe’s economy virtually shut down this month. Even though global governments are using all their tools to avoid a sustained economic crisis, a multi-month lockdown could easily start a vicious recessionary cycle. On a positive note, economic activity in China is already increasing, with several companies reporting positive supply-chain-related developments, which could support the global economy in the crucial coming months.
The energy sector surged higher by a whopping 14% today, with financials, materials, industrials, and utilities also registering double-digit gains thanks to the furious short-covering rally. The Dow rose by the most in almost 90 years, but on a cautionary note, the most bullish days of the industrial average all occurred during devastating bear markets. Credit markets also sent promising signals, with credit spreads narrowing and Treasury yields pushing higher, but the dollar held on to most of its recent gains, suggesting that bulls are not out of the woods yet.
As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!
Joe
