U.S. Stocks Climb Amid Swirling Issues
June 02 2020 - 10:22AM
Dow Jones News
By Joe Wallace and Xie Yu
U.S. stocks edged higher Tuesday as investors faced a protracted
economic recovery following the coronavirus lockdowns, as well as
tensions with China and outbreaks of violence across American
cities.
The Dow Jones Industrial Average rose 73 points, or 0.3%, and
the S&P 500 rose 0.1%. The Nasdaq Composite was down less than
0.1%, and is less than 3% off its record high.
The S&P 500 has risen for five out of the past six sessions,
boosted by data suggesting the downturn in the U.S. economy has
bottomed and hopes that the coronavirus will be brought under
control.
Still, the U.S. economy could take the better part of a decade
to fully recover from the pandemic and related shutdowns, a U.S.
budget agency said Monday. Output isn't expected to catch up to a
previously forecast level until the fourth quarter of 2029, the
nonpartisan Congressional Budget Office said.
"It's clear that we're not going to go back to the levels [of
economic activity] we saw pre-Covid-19," said Sophie Huynh, a
strategist at Société Générale. "It's impossible: we're living in a
self-inflicted recession. We're going to start the post-Covid 19
world at the start of a new economic cycle."
Ms. Huynh said she expects a "swoosh-shaped" economic recovery
that is beneficial for stocks and other riskier assets. Shares of
companies that are sensitive to economic growth, such as energy
producers, have rallied in recent sessions.
Cities across the U.S. faced another night of protests sparked
by the death of George Floyd in Minneapolis last week. Some major
metropolitan areas, including New York and Los Angeles, either
issued or extended nighttime curfews. President Trump called for a
tougher government response to the violent unrest, and said he is
ordering thousands of armed soldiers and law enforcement officers
to the nation's capital.
The unrest has added to challenges faced by businesses seeking
to get back up and running following lockdowns designed to stem the
coronavirus pandemic. Macy's delayed the reopening of some stores
shut by coronavirus. Apple stores that had recently unlocked their
doors were boarded back up.
Investors have largely shrugged off the impact of the protests
on earnings and the U.S. economy. However, public-health and
government officials worry ongoing protests could result in another
jump in coronavirus cases in the coming weeks.
"The one thing the market would be very unforgiving of is the
case count in the U.S. starting to go up again," said Andrew
Sheets, chief cross-asset strategist at Morgan Stanley.
International stocks gained ground, extending a recent rally
fueled by hopes of a rebound in the global economy. The Stoxx
Europe 600 advanced 1.5%, led by shares in auto and auto-part
makers.
Germany's DAX index surged 3.7% following a public holiday
Monday, with big gains for shares in carmakers.
"There's a lot of positivity starting to build up around
Europe," said James McCormick, head of desk strategy at NatWest
Markets, pointing to a decline in coronavirus cases and relaxation
of lockdown measures on the continent.
German stocks received an extra boost from reports that
Chancellor Angela Merkel's ruling coalition is holding talks about
delivering a second spending package to boost the country's
economy, Mr. McCormick added.
Japan's Nikkei 225 closed 1.2% higher while Hong Kong's Hang
Seng Index rose 1.1%.
"The equity market has been pricing in a smooth recovery of the
economy, although it might be too optimistic while overlooking some
potential risks," said Anthony Chan, chief Asia investment
strategist at Union Bancaire Privée. Those hazards include tensions
between the U.S. and China and the possibility of new coronavirus
outbreaks, which could lead to a resumption of lockdown measures,
Mr. Chan said.
Among individual names, Western Union rose 12% after Bloomberg
News reported that the money-transfer provider was seeking to buy
MoneyGram International. Shares of Host Hotels & Resorts, which
said it expects to reopen 11 more hotels this month, rose 1.6%.
In bond markets, the yield on the 10-year U.S. Treasury note
rose to 0.680%, from 0.669% on Monday.
Brent crude futures, the benchmark for international oil
markets, rose 1.7% to $38.88 a barrel. U.S. crude futures rose 1.2%
to $35.85. An alliance of oil-producing nations, led by Saudi
Arabia and Russia, is close to a deal that would extend output cuts
through Sept. 1, according to delegates. The Organization of the
Petroleum Exporting Countries has agreed to move a planned
conference call to discuss future output curbs to Thursday, they
said.
Write to Joe Wallace at Joe.Wallace@wsj.com and Xie Yu at
Yu.Xie@wsj.com
(END) Dow Jones Newswires
June 02, 2020 10:07 ET (14:07 GMT)
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