U.S. Stocks Open Higher as Hopes Build for More Stimulus
June 03 2020 - 10:03AM
Dow Jones News
By Caitlin Ostroff and Frances Yoon
Global stocks rose Wednesday as social unrest across the U.S.
showed signs of calming, and investors bet economic activity will
improve with the ebbing of coronavirus infections and additional
government spending to shore up the recovery.
The S&P 500 gained 0.7% in early New York trading, while the
Dow Jones Industrial Average added 222 points, or 0.9%. The Nasdaq
Composite rose 0.3%.
The broad S&P benchmark is less than 10% off the record high
it hit in February. Meanwhile, the pan-continental Stoxx Europe 600
climbed 1.7%, while major Asian benchmarks closed higher.
Earlier, shares in Lyft climbed 4.2% in off-hours trading after
the ride-hailing platform said demand had risen in recent weeks as
people began venturing out following Covid-19 lockdowns. Shares of
Reinsurance Group of America fell more than 10% off-hours after the
company commenced an underwritten public offering for about $500
million in stock.
The ADP Research Institute's report showed private sector
employment in the U.S. decreased by 2.76 million jobs from April to
May, better than analysts expected. Figures from the Institute for
Supply Management showing economic activity across U.S. service
industries and other sectors last month are due at 10 a.m. ET.
Many cities in the eastern U.S. remained largely quiet
overnight, with the violent outbursts and skirmishes of recent days
abating, though protesters defied curfews in some areas. Markets
have continued to rally over the past week despite the social
unrest in the U.S. as investors bet that the protests sparked by
the killing of George Floyd wouldn't curtail business activity or
have a sustained impact on the economy.
Stimulus measures from governments and central banks in recent
weeks have also opened the floodgates on cheap money, which is
making its way into financial markets and boosting asset prices,
investors said. President Trump plans to meet with senior advisers
as soon as this week to discuss policy options for the next
coronavirus relief package as the administration prepares for
negotiations with Congress, according to a senior administration
official.
Some investors are betting that there may be more stimulus
coming in Europe as well, with the European Central Bank
potentially opting to expand its bond-purchase program as early as
its meeting Thursday. South Korea on Wednesday also proposed
expanding fiscal spending to bolster the economy. The recent rally
in global equity markets suggests that investors expect such
measures to lead to a sharp recovery in economic output.
"The narrative is still a strong V-shaped recovery," said Peter
Garnry, head of equity strategy at Saxo Bank. The market is being
too optimistic in anticipating that "all this stimulus from
governments and central banks will bring society from its
near-death experience and the employment rate will get back
considerably by the end of the year," he said.
The gradual easing of lockdown measures around the world has
also failed to trigger a second wave of infections so far, fueling
optimism in markets, said Patrick Spencer, managing director of
U.S. investment firm Baird. Daily reported infections in the
10-most affected countries have continued to decline, according to
data compiled by Johns Hopkins University.
"There's little evidence of a resurgence in the virus, and
that's really bolstered investor confidence," Mr. Spencer said. "If
basically the fundamentals aren't as bad as the market discounts,
then markets will always improve and the news is getting less
bad."
Progress toward a vaccine has also boosted sentiment. On
Tuesday, Anthony Fauci, a leading expert in the U.S. government's
response to the coronavirus pandemic, expressed cautious optimism
that several successful vaccine candidates would prove effective
"within a reasonable period of time" to fight coronavirus.
South Korea's Kospi Composite led gains in the Asia-Pacific
region, adding 2.9% after the government proposed an extra budget
worth $28.9 billion, the third this year, to ease the economic
impact of the coronavirus pandemic. Hong Kong's Hang Seng Index
rose 1.4%, while Japan's Nikkei 225 advanced 1.3%.
Global equity markets are being fueled by an improvement in
business sentiment, gradual reopenings, subsiding concerns about an
oversupply of oil, and additional stimulus measures, according to
Kerry Craig, global market strategist for J.P. Morgan Asset
Management. However, the abundance of risks calls for a cautious
approach to investing, he said.
"It's difficult to say what factors could impede the performance
in equities, but we have tensions rising between the U.S. and
China, a U.S. election coming up, and there is a politically
charged environment in the U.S. right now, so there are enough
risks out there," Mr. Craig said. "We'd rather be more balanced
right now than rotate into cheaper parts of the market."
U.S. crude-oil futures fell 0.5% to $36.64 a barrel after
Bloomberg reported that the meeting OPEC and its allies had been
discussing moving up will not go ahead unless participating nations
resolve a dispute over compliance with the historic production cuts
agreed in April.
The yield on the 10-year U.S. Treasury note rose to 0.721%, from
0.679% Tuesday.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Frances
Yoon at frances.yoon@wsj.com
(END) Dow Jones Newswires
June 03, 2020 09:48 ET (13:48 GMT)
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