The S&P 500 closed at its highest level since Feb. 21, bringing it within 5% of its record close from Feb. 19. Each of the Dow and Nasdaq also advanced more than 1% during Monday’s session.
Shares of airlines, travel and leisure stocks surged, with these stocks buoyed by hopes of reopening the economy. Shares of American Airlines (AAL) rose another 9% Monday afternoon, following a 77% weekly surge last week, and Boeing (BA) led advances in the Dow. Cruise lines including Carnival (CCL) and Royal Caribbean (RCL), along with lodging companies including Hilton (HLT) and Wynn Resorts (WYNN), outperformed the broader market.
An unexpectedly strong May jobs report fueled a stock rally that sent the Nasdaq Composite above its February 19 record high. The surge added to a weeks-long melt-up in equities, as investors eyed signs that early moves to reopen businesses were bringing back some workers and driving advances in economic activity.
“Nonfarm payrolls unexpectedly rebounded by 2.5mn [million] in May, and the details of the report are consistent with a large and genuine rebound in labor market activity,” Goldman Sachs economists led by Jan Hatzius said in a note. “The unemployment rate declined from 14.7% in April to 13.3% in May, much lower than expected, though the BLS suggested that 16.4% of the workforce remains unemployed after adjusting for a misclassification of workers employed but not at work (down from 19.5% in April).”
“Encouragingly on that front, three quarters of coronacrisis job losers reported being on temporary layoff in May—a positive sign for the strength of the coming labor market recovery,” the economists added. “We expect the unemployment rate to fall further in June.”
Still, at least some economists noted that the unexpectedly strong rebound in the labor market evidenced in the jobs report could discourage lawmakers from injecting further economic stimulus. Others also noted that the distribution of hundreds of billions of dollars via Congress’s Paycheck Protection Program in May could have led to an overstatement of the number of workers brought back on payrolls permanently, with another wave of layoffs a lingering risk once funds from the program run out.
While market participants await further data to affirm the pace of the recovery, more cities and states reopening their economies have so far provided ample fuel for risk assets. New York City kicked off its first phase of reopening on Monday, joining the rest of the state and many other metropolitan areas across the country in bringing businesses back online after pausing in mid-March. The state overall reported a 0.2% one-day increase in new cases on Sunday, or the lowest pace in more than two months.
New York City also on Sunday lifted its curfew related to protests and unrests spurred by the killing of George Floyd, joining Chicago and Philadelphia in easing city-wide measures to limit violence and property destruction as the mass gatherings settled. Protests neared the two-week mark in many major cities nationwide, with the vast majority of these taking place peacefully.
Later this week, market participants will receive inflationary economic data in the monthly consumer price index and producer price index, as well as the Federal Open Market Committee’s latest monetary policy decision. The Federal Reserve will likely keep its target range for the federal funds rate between 0% to 0.25% and signal policymakers’ expectations to keep interest rates near zero for the next two years, based on consensus expectations.
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4:04 p.m. ET: S&P rallies to highest level since Feb. 21
Here were the main moves in markets as of 4:04 p.m. ET:
Quarterly economic activity peaked in the fourth quarter of 2019, the NBER added.
Here’s what else the NBER said about the current downturn, in relation to previous recessions:
“The usual definition of a recession involves ‘a decline in economic activity that lasts more than a few months.’ However, in deciding whether to identify a recession, the committee weighs the depth of the contraction, its duration, and whether economic activity declined broadly across the economy (the diffusion of the downturn). The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions. Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions.”
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11:46 a.m. ET: Tesla trades above February record high after China car sales data rebounds
The electric car-maker’s gains came after new data showed Tesla was the top-selling new-energy vehicle in China in May, selling 11,065 Model 3 units made in Shanghai for the month. That marked a gain of 205% from April, according to the China Passenger Car Association. Tesla’s vehicle sales in China in April had been down to 3,635, from around 10,160 in March, according to the CPCA.
Overall, China’s passenger car sales rose 1.9% in May over the prior year to 1.61 million, the CPCA said, in a rebound from the 5.6% drop in April.
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11:00 a.m. ET: World Bank projects 2020 will see worst global economic contraction since World War II
“That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870,” the World Bank said.
The U.S. is expected to see economic activity contract by 6.1% this year, and advanced economies as a whole are expected to see activity drop by 7%. Emerging market and developing economies (EMDEs)will likely shrink by 2.5% for their first group-wide contraction in at least six decades, the World Bank said.
“Under the baseline forecast—which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting — global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%,” the World Bank said.
“However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages,” it added. “A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.”
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9:34 a.m. ET: Stocks open higher
Here were the main moves in markets as of 9:34 a.m. ET:
S&P 500 (^GSPC): +13.69 points (+0.46%) to 3,208.58
6:02 p.m. ET Sunday: Stock futures rise, adding to last week’s gains
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:02 p.m. ET:
S&P 500 futures (ES=F): 3,197.75, up 11 points, or 0.35%
Dow futures (YM=F): 26,165.00, up 93 points, or 0.34%
Nasdaq futures (NQ=F): 9,834.00, up 25.5 points, or 0.26%
NEW YORK, NY: A man wearing a protective mask walks past a closed store as major cities in the U.S. adjust to restrictive measures during the coronavirus pandemic. (Photo by John Lamparski/Getty Images)
