Stocks rally on hopes of economic recovery
NEW YORK — Stocks rose on Wall Street, notching their third gain in a row, after US retail sales rebounded last month by much more than economists were expecting. The S&P 500 climbed 1.9% Tuesday in another volatile day. The spending data bolstered hopes that the economy can pull out of its recession relatively quickly. However trading remains skittish as worsening Coronavirus trends in several hotspots around the world rattle investors. After shooting to an early 2.8% gain, the S&P 500 surrendered all but a sliver of it at one point before rallying back. Treasury yields also climbed, but trading there was likewise volatile.
The tenuous rise for the US market followed up on stronger gains for European and Asian stocks. Treasury yields also climbed in another sign of improvg optimism, but trading there was likewise volatile.
The Dow Jones Industrial Average was up 566 points, or 2.2%, at 26,330, as of 2 p.m. Eastern time,
and the Nasdaq composite was up 1.8%
“The markets have been looking forward to the economy reopening, and that’s a large part of the story for the next few months,” Bruce Bittles, chief investment strategist at Baird, said.
“My feeling is that while reopenings and things get better, it won’t be without some backsteps, and I think it’ll be a rocky few months more for the markets.”
Retail sales jumped 17.7% from April to May, more than double economists’ expectations, to retrace some of their record-setting plunges in March and April as businesses reopened across the country. It follows earlier reports that the US job market unexpectedly strengthened last month and gives more credence to investor expectations that the worst of the downturn may have already passed.
Economists at IHS Markit said this could be the shortest recession on record for the United States, perhaps just a couple months.
Among other encouraging signs spurring markets worldwide: Researchers in England said they have the first evidence that a drug can improve survival from COVID-19, one that is already widely available and cheap. Analysts also cited a report from Bloomberg News that the White House is preparing a nearly $1 trillion infrastructure plan, but any such proposal is likely to face huge challenges about how to pay for the improvements.
Underpinning all of it is continued aid coming from central banks, which have repeatedly come to the economy’s rescue. The Federal Reserve helped turn markets around on Monday after it said it will buy individual corporate bonds as part of a previously announced program to support lending markets.
Still, caution continues to run through markets after the remarkable run for stocks in recent months. A record number of fund managers in Bank of America’s monthly survey say the stock market is overvalued following its nearly 40% surge since late March.
The rally has been showing some cracks recently as investors worry that a possible resurgence of infections could push governments to reinstate lockdown measures to slow the spread of the virus. Even if the stay-at-home orders don’t come back, worried consumers and businesses could pull back on their spending.
Analysts on Tuesday cited discouraging trends in Florida and Texas. China also locked down a third neighborhood in Beijing to contain a new outbreak that has infected more than 100 people after the country appeared to have largely contained the virus since it first appeared there late last year.