U.S. Stocks Climb as Hopes Build for More Stimulus
June 03 2020 - 10:37AM
Dow Jones News
By Caitlin Ostroff and Frances Yoon
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 rose 0.8%, and the Dow Jones Industrial Average
added about 235 points, or 0.9%. The technology-heavy Nasdaq
Composite gained 0.6%, climbing to within 2% of February's all-time
high.
Sectors that have been battered this year led the S&P 500,
with the energy, financial and industrial groups each gaining at
least 1.5%.
Investors are looking ahead to the U.S. jobs report Friday for
insight into the effects of the coronavirus on employment. In a
potential bright sign Wednesday, 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.
Among individual stocks, shares of Lyft climbed 7.7% after the
ride-hailing platform said demand had risen in recent weeks as
people began venturing out following Covid-19 lockdowns.
CrowdStrike Holdings shares rose 9% after the cybersecurity company
raised its financial projections for the year.
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 say. 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.
Overseas, the Stoxx Europe 600 gained 1.8%. 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.
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."
The yield on the 10-year U.S. Treasury note rose to 0.734%, from
0.679% Tuesday. Yields rise as bond prices fall.
Karen Langley contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Frances
Yoon at frances.yoon@wsj.com
(END) Dow Jones Newswires
June 03, 2020 10:22 ET (14:22 GMT)
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