The trifecta that boosted major benchmarks extended Friday’s improbable rally, and came despite a raft of grim data. As states and cities slowly reactivate public life, hopes for a relatively brisk economic revival — and the potential for an effective COVID-19 treatment — have counterbalanced figures that underscore how badly the coronavirus pandemic has roiled the U.S. economy.
The latest came in the form of April retail sales, which plunged at a startling rate of 16.4% — the worst ever monthly read. Still, markets have taken comfort in the extraordinary steps the Federal Reserve has taken to shield the economy from the fallout.
Federal Reserve Chairman Jerome Powell said the central bank can still do more to soften the economic blow of the coronavirus pandemic, telling CBS’s 60 Minutes that a recovery is possible in the second half of the year.
“There's a lot more we can do,” Powell said. “We've done what we can as we go. But I will say that we're not out of ammunition by a long shot.”
The brisk rally that’s carried stocks off March’s multi-year lows has made some analysts nervous that investors are being too optimistic, given that there’s neither an approved coronavirus treatment or vaccine on the immediate horizon.
“Though we are highly skeptical about its durability and think it is based on assumptions that may turn out to be mistaken, we don’t view the late March-April rebound in the S&P 500 as illogical,” RBC economists wrote in a research note. “Rather, we think much of the rally has been driven by the idea that the economy is bottoming in 2Q and April in particular.”
Amid rising fears of a potential second wave of infections, Powell said that “assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year. For the economy to fully recover people will have to be fully confident and that may have to await the arrival of a vaccine."
The plunge in consumer spending has been amplified by the unprecedented loss of jobs, highlighted by the latest report on initial unemployment claims, which on Thursday showed a greater than expected 2.981 million Americans filed for first-time unemployment benefits last week. This brought the total number of new claims filed since the week ended March 20 to a staggering 36.5 million.
Monday’s Moderna rally sent blue-chip and technology shares on a tear, with the Dow closing up over 900 points and the S&P having its best day since April 6, closing at its highest level in over 2 months.
Here were the main moves in markets as of 4:04 p.m. ET:
Gold (GC=F): -$22.60 (-1.29%) to $1,733.70 per ounce
10-year Treasury (^TNX): +10.4 bps to yield 0.7440%
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2:20 p.m. ET: Go long, investor says
With stocks having rebounded around 30% from the March lows — the Dow is up 900 points intraday — at least one investor thinks traders can find the best pickings in technology and ‘serendipity’ stocks as lockdowns are relaxed.
James McDonald, CEO of Hercules Investments told Yahoo Finance that “this is a wonderful time to invest. Right now, the leaders in the S&P 500 (^GSCP) are no longer oil companies and big industrial companies. They are tech companies that are sitting on hoards of cash,” he added.
The market’s recent rally off the March 23 lows has been fueled largely by mega-cap tech stocks.
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1:35 p.m. ET: Why lost jobs may not come back
Permanent job losses are likely to be a feature of the eventual U.S. recovery, according to sobering University of Chicago research, which estimated that 42% of recently unemployed workers will not return to their jobs amid the “profound” shock stemming from coronavirus lockdowns.
11:45 a.m. ET: Stocks extend gains as reopen hopes, Moderna fuel rally
The Moderna rally is sending stocks to new session highs. The S&P 500 is now having best day in over 5 weeks, while the Dow and Nasdaq are both up well over 2%.
Here’s where benchmarks traded just before the noon hour:
10-year Treasury (^TNX): yielding 0.6770, up 0.037 basis points
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11:15 a.m. ET: Uber braces for more layoffs
According to a report The Wall Street Journal, Uber (UBER) is set to cut up to 3,000 more jobs as the coronavirus crisis bites. CEO Dara Khosrowshahi made the announcement in an email on Monday, less than two weeks after the ride hailing and food delivery giant said it would eliminate about 3,700 jobs and planned to save more than $1 billion in fixed costs. Uber meanwhile, is still in talks with Grubhub (GRUB) about a potential merger.
Still, traders appeared to like that headline, with the stock rocketing by over 8% in early U.S. trading, joining in the broad rally sparked by the Moderna vaccine news.
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10:00 a.m. ET: Homebuilder sentiment rises
The National Association of Home Builders/Wells Fargo Housing Market Index rose seven points to 37 this month after a record plunge in April, signaling confidence among single-family homebuilders and suggesting the worst of the economic downturn might be over.
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10:00 a.m. ET: Election becoming a ‘significant risk’ to the market
Democratic presidential hopeful former US vice president Joe Biden talks with moderators (L-R) Univision's journalist Ilia Calderon, CNN chief Washington correspondent Jake Tapper and CNN political correspondent Dana Bash at the end of the 11th Democratic Party 2020 presidential debate in a CNN Washington Bureau studio in Washington, DC on March 15, 2020. (Photo by MANDEL NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)
With the COVID-19 wild card scrambling the chance of President Donald Trump being re-elected, RBC thinks November’s general election is “ a growing risk for stocks that may hit as early as the summer.”
In a comprehensive analysis published over the weekend, the bank noted that for Wall Street, “the main risk that equity investors need to monitor on the election is the possibility that Trump won’t get re-elected in November.”
Expectations that Trump will win again fell hard as stocks slid in late February and March when the pandemic was priced in, and rebounded when stocks began to dig out of their hole in late March and April. This relationship has reflected the basic idea from our investor surveys over the past year, in which participants have consistently said that a Trump win is a bullish outcome for stocks.
It’s worth noting that while Biden has generally been viewed as a neutral outcome for the stock market by the investors in our survey, but a growing percentage have viewed him as a negative outcome for the market in recent quarters, suggesting that sentiment on him may be shifting. One issue that investors need to monitor on this issue is the selection of Biden’s running mate.
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9:30 a.m. ET: Stocks rocket at the open as Powell, Moderna let the bulls out
Wall Street was set for a banner session on Monday, as traders cheered encouraging remarks from the Federal Reserve chairman, and news that the first coronavirus vaccine tested on humans has shown promising remarks in humans. Crude is also adding to the market’s sentiment, soaring by over 10% and recovering lost ground from last month’s startling plunge.
The bulls are running wild after Moderna’s vaccine news hit the wires, with all major benchmarks soaring by over 2% ahead of the opening bell.
Morgan Stanley estimates that the pandemic vaccine market is a $10 to $30 billion market. Currently, there are over 100 vaccine candidates under development, with 8 in clinical trials.
“We believe 6...have both a reasonable likelihood of clinical success and can be manufactured at scale to be relevant,” the firm’s analysts wrote in research on Monday — including Moderna, Pfizer, AstraZeneca and Johnson & Johnson’s. “We expect significant production available by mid-2021 with limited quantities as early as fall 2020.”
The most promising coronavirus vaccines, and their timelines to development.
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7:35 a.m. ET: Moderna reports ‘positive’ initial vaccine trial
The vaccine, mRNA-1273, was also found to be generally safe and well tolerated in the early-stage study, the study noted.
Moderna’s stock soared in pre-market action, adding a whopping 30% from Friday’s close, as stocks rocketed higher.
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7:30 a.m. ET Monday: Stock futures soar, point to sharp gains
Stock futures added to overnight gains as more economies reopened and the Fed chair said there’s more the central bank could do to bolster the recovery. The risk rally also included oil, which skyrocketed above $32 per barrel, moving further away from a brutal selloff just weeks ago.
Here were the main moves as of 7:30 a.m. ET:
S&P 500 futures (ES=F): 2,893.00, up +46.50 or +1.63%
Dow futures (YM=F): 23,924.00, up +407.00 or +1.73%
Nasdaq futures (NQ=F): 9,228.75, up +132.25 or +1.45%
