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U.S. Stocks Rally To Best Levels In A Month On Easing Coronavirus Concerns

wallstreet aug31 14apr20

Following the mixed performance seen in the previous session, stocks moved sharply higher over the course of the trading day on Tuesday. With the strong upward move on the day, the major averages reached their best closing levels in over a month.

The major averages all closed firmly positive, although the tech-heavy Nasdaq outperformed its counterparts. The Nasdaq spiked 323.32 points or 4 percent to 8,515.74, while the Dow jumped 558.99 points or 2.4 percent to 23,949.76 and the S&P 500 surged up 84.43 points or 3.1 percent to 2,846.06.

The rally on Wall Street came as traders continued to express optimism about signs of a flattening of the coronavirus curve.

In a press briefing on Monday, President Donald Trump defended his administration's response to the pandemic and indicated he is working on plans to re-open the country.

Other officials, such as White House health advisor Dr. Anthony Fauci and New York Governor Andrew Cuomo, have also recently expressed cautious optimism.

Cuomo said on Tuesday that the number of coronavirus deaths in New York rose to 778 on Monday after declining for two days but noted other indicators continue to be more encouraging.

Encouraging exports data out of China has also helped ease fears of the pandemic resulting in a deep global recession.

In dollar terms, Chinese exports decreased 6.6 percent on a yearly basis in March, data from the General Administration of Customs revealed. This was much slower than the expected decrease of 14 percent.

Meanwhile, the International Monetary Fund warned the global economy could see the worst recession since the Great Depression as a result of the coronavirus pandemic and the containment measures adopted to slow the outbreak.

World GDP is set to contract 3 percent this year, thanks to the lockdowns imposed by countries around the world, the IMF said in its latest World Economic Outlook report. The lender expects global GDP to grow 5.8 percent next year.

In a January update to the WEO, the IMF had predicted 3.3 percent global growth this year and a 3.4 percent expansion for next year. In 2019, the world economy grew 2.9 percent.

Traders were also digesting the latest corporate results as earnings season gets underway, with healthcare giant Johnson & Johnson (JNJ) moving sharply higher after reporting first quarter results that exceeded analyst estimates and raising its quarterly dividend.

On the other hand, JPMorgan (JPM) and Wells Fargo (WFC) came under pressure after both financial giants reported weaker than expected first quarter earnings.

Sector News

Technology stocks turned in some of the market's best performances on the day, contributing to the particularly strong upward move by the tech-heavy Nasdaq.

Apple (AAPL) helped lead the way higher, with the tech-giant spiking by 5 percent as Chinese government data showed iPhone sales in China rebounded dramatically in March to about 2.5 million.

Reflecting the strength in the tech sector, the Dow Jones U.S. Software Index skyrocketed by 4.7 percent, the Philadelphia Semiconductor Index soared by 4.4 percent and the NYSE Arca Networking Index surged up by 3.4 percent.

Substantial strength was also visible among retail stocks, as reflected by the 4.4 percent jump by the Dow Jones U.S. Retail Index. The rally came a day ahead of the release of a report on U.S. retail sales in March.

Healthcare, utilities, and commercial real estate stocks also saw considerable strength on the day, while banking stocks bucked the uptrend following the disappointing earnings news from JPMorgan and Wells Fargo.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index surged up by 3.1 percent, while China's Shanghai Composite Index jumped by 1.6 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index slid by 0.9 percent, the French CAC 40 Index rose by 0.4 percent and the German DAX Index shot up by 1.3 percent.

In the bond market, treasuries showed a lack of direction over the course of the session before closing nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 0.752 percent.

Looking Ahead

Reports on U.S. retail sales and industrial production in the month of March could attract some attention on Wednesday, although the expected sharp declines may already be priced into the markets.

Traders will also be presented with a slew of other less closely watched data, including reports on New York manufacturing activity, business inventories, and homebuilder confidence.

The Federal Reserve is also scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

On the earnings front, Bank of America (BAC), Citigroup (C), Goldman Sachs (GS) and UnitedHealth (UNH) are among the companies due to release their quarterly results before the start of trading.

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