By Karen Langley and Caitlin Ostroff
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
stimulus.
Investors favored shares that have been battered during the
market turmoil this year, suggesting their growing optimism about
prospects for the economy.
The S&P 500 advanced 42.05 points, or 1.4%, to 3122.87. The
Dow Jones Industrial Average added 527.24 points, or 2%, to
26269.89. The technology-heavy Nasdaq Composite gained 74.54
points, or 0.8%, to 9682.91, off only 1.4% from February's all-time
high.
Stocks have staged a dramatic rally from their late March lows,
a rebound most analysts attribute to the stimulus offered by the
Federal Reserve and Congress to keep the economy afloat.
The S&P 500 was led higher Wednesday by the energy,
financial and industrial groups, which have sustained the deepest
losses in 2020 of the broad stock index's 11 sectors. All three
group rose at least 3%.
Shares of small-cap companies, which tend to be sensitive to the
economy, also rallied, with the Russell 2000 index gaining
2.4%.
"The fact that we're seeing broader participation right now is
indicative of increasing risk appetite among investors and more
confidence in the equity market rally," said Ed Campbell, portfolio
manager at QMA.
Investors are looking ahead to the U.S. jobs report Friday for
insight into the state of the labor market. In a potential bright
sign Wednesday, the ADP National Employment Report showed nonfarm
private sector employment in the U.S. decreased by 2.76 million
jobs in May, a smaller loss than economists expected.
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.
"Investors are continuing to ignore the three P's -- pandemic,
protests and politics -- and are instead focused on what
increasingly is being interpreted as a quicker and better than
expected recovery in the economy and the idea that that may portend
a quicker recovery for earnings as well," said David Donabedian,
chief investment officer of CIBC Private Wealth Management.
Stimulus measures from governments and central banks in recent
weeks have 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.
The gradual easing of lockdown measures around the world has
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.
"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."
Among individual stocks, shares of Lyft climbed $2.76, or 8.7%,
to $34.44 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 $5.85, or 6.3%, to
$98.10 after the cybersecurity company raised its financial
projections for the year.
Overseas, the Stoxx Europe 600 gained 2.5%. 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 0.761%, from
0.679% Tuesday. Yields rise as bond prices fall.
Frances Yoon contributed to this article.
Write to Karen Langley at karen.langley@wsj.com and Caitlin
Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
June 03, 2020 17:10 ET (21:10 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.