Market Snapshot: Dow ends modestly higher as Wall Street looks beyond civil unrest to hopes for economic recovery

On Friday, the Dow booked a weekly gain of 3.8%, while the S&P 500 finished 3% higher and the Nasdaq Composite Index ended the period 1.8% higher. In May, the Dow logged a 4.3% gain, the S&P 500 climbed 4.5%, while the Nasdaq marked a 6.8% return on the month.

What drove the market?

U.S. stocks closed modestly higher Monday on hopes that the worst of the economic damage inflicted by the COVID-19 pandemic may have passed, even as states deployed National Guard units to major U.S. cities to help quell civil unrest. All 50 states have embarked on some stage of reopening from forced shutdowns due to the pandemic.

“Our big solution was blanket social-distancing measures,” Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company, told MarketWatch. “That caused the economic valley that we are climbing out of. That’s what the market is reflecting.”

The Institute for Supply Management said its manufacturing index climbed to 43.1 last month from an 11-year low of 41.5 in April. Economists surveyed by MarketWatch had forecast the index to total 44. Readings under 50 indicate more companies are shrinking instead of expanding.

“The near-term path remains uncertain, but signs that the economy is picking itself up off the mat is a positive,” said Jim Baird, chief investment officer of Plante Moran Financial Advisors.

President Donald Trump on Monday blasted U.S. governors as “weak” over their responses to weekend demonstrations in major cities, telling them to get tougher on protesters amid outrage sparked by the death of George Floyd while he was in police custody.

Major cities from Los Angeles to New York have been engulfed in nightly protests after Floyd, a black man, died last Monday following a confrontation with police in Minneapolis in which one officer, Derek Chauvin, was captured on video driving his knee onto Floyd’s neck until the handcuffed man lost consciousness and later died.

Minnesota Attorney General Keith Ellison, who was asked on Sunday by Minnesota Gov. Tim Walz to lead the investigation into any prosecutions related to Floyd’s deal, warned on Monday that the four officers at the scene would be charged to the “highest degree of accountability” but also underscored that he refused to rush the case.

Shorter curfews were announced Monday for Minneapolis and St. Paul, while New York’s Gov. Andrew Cuomo placed New York City under curfew Monday night.

On the international front, Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods, including pork and soybeans, Reuters and Bloomberg News reported on Monday, citing people familiar with the matter.

The move comes after Trump on Friday announced a number of measures against Beijing, including paving the way for the U.S. to end Hong Kong’s special status, to address what he described as a number of violations from China. Those include Beijing’s handling of COVID-19, which was first identified in Wuhan in December.

Trump’s steps against China, however, were less severe than some had feared, after Beijing tightened its control over Hong Kong by implementing a new national-security law.

“There remain many other hurdles ahead, but clearly President Trump will try to avoid roiling markets until his election unless absolutely necessary,” said John Vail, chief global strategist at Nikko Asset Management.

Reports of a suspension by China of certain U.S. farm purchases still could raise the threat of an erosion of a hard-fought, phase-one trade agreement between the two superpowers signed earlier this year.

Read:Why is the U.S. stock market ignoring a brewing crisis in Hong Kong?

While the angry clashes between civilians and law enforcement, including fires near the White House, aren’t expected to have long-term economic implications, the protests come as many retailers and businesses are still swooning from the pandemic and were caught up in looting and vandalism that ensued during the weekend demonstrations.

“The direct economic impact of the protests is small, at least so far,” Mark Zandi, chief economist of Moody’s Analytics, told MarketWatch. However, he said that the near-term damage to the psyche of consumers and the business community may be more substantial.

“Just when people were starting to come out of the proverbial bunkers, the protests may be too much for them, and they will go back in,” he said. “The protests also are symptomatic of just how deep the economic problems and racial tensions go in our country,” the economist said.

See: 75% of frontline workers in New York, the epicenter of coronavirus, are people of color—and black Americans are twice as likely to die from COVID-19

Experts also worry that the throngs of people gathering at protests may foster conditions for a second wave of COVID-19 infections, just as public health officials hoped they were getting a handle on the viral outbreak.

Analysts also said they see potential for the next big coronavirus-aid package to be ready by late July, as the Senate returns to work following a weeklong holiday and after the Democratic-run House in mid-May approved its $3 trillion HEROES Act. An extra $600 weekly benefit that some households are getting under the $2.2 trillion CARES Act is set to expire at the end of July.

Which stocks were in focus?

• Protests slammed the stores of major retailers owned by Target Corp. TGT, -2.32% and Walmart Inc. WMT, -0.08%. Target shares fell 2.3%, while Walmart’s stock ended down 0.1%.
• Apple Inc. AAPL, +1.23% and CVS Health Corp. CVS, +0.10% also said they would temporarily close some stores due to looting fears. Apple shares gained 1.2%, while CVS stock added.0.1%.
• Gilead shares fell 3.4% after the company released data from its phase-three clinical trial for its experimental coronavirus treatment.
• Southwest Airlines Co. LUV, +4.73% disclosed Monday that it received $651.8 million as the second tranche of the U.S. Department of Treasury’s Payroll Support Program. Its shares advanced 4.7%.
• Shares of Digital Ally Inc. DGLY, +75.89% and Cemtrex Inc. CETX, +172.43% vaulted 75.9% and 172.4% higher, respectively, on Monday as nationwide protests against police killings fueled investor interest in the security products makers.
• Pfizer Inc. PFE, -7.14% shares lost 7.2% Monday, after the drugmaker announced that its trial for a potential breast cancer treatment would be discontinued because results showed that it failed to improve survival rates.
• Coty Inc. COTY, +20.93% shares surged 21% after the branded beauty products company said it would sell a majority stake in its retail hair business, including Wella and Clairol, to buyout firm KKR & Co. KKR, +1.94%. Coty also appointed Chairman Peter Harf as CEO to spearhead its turnaround, its fourth CEO in less than four years, according to a Wall Street Journal report.

How did other markets trade?

West Texas Intermediate crude for July delivery CLN20, +0.25% lost 5 cents, or 0.1%, to settle at $35.44 a barrel.

August gold GCM20, +0.02% finished down $1.40, or less than 0.1%, ending at $1,750.30 an ounce on the New York Mercantile Exchange.

In global equities, the Stoxx Europe 600 SXXP, +1.09% index closed 1.1% higher, while the FTSE 100 index UKX, +1.47% traded up 1.5%.

In Asia, the Nikkei NIK, +0.84% added 0.8%, and Hong Kong’s Hang Seng Index HSI, +3.35% closed 3.4% higher, with traders citing relief over Trump’s Friday announcement.

The 10-year Treasury note yield TMUBMUSD10Y, 0.669% was 1.2 basis points higher at 0.662%. Bond prices move in the opposite direction of yields.

The greenback lost ground against its major rivals, with the ICE U.S. Dollar index DXY, -0.51% down about 0.5%.

Mark DeCambre contributed reporting