U.S. stock benchmarks surged Friday morning, as Wall Street aimed to finish a roller-coaster week on a better note following one of the sharpest selloffs for the market since mid-March when the COVID-19 pandemic was at its worst.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.54% rose 584 points, or 2.3%, at 25,713, the S&P 500 index SPX, +0.42% picked up 60 points, or 1.9%, at 3,064, while Nasdaq Composite Index COMP, +0.37% climbed 182 points, or 1.9%, at 9,673.
On Thursday, the Dow closed down 1,861.82 points, or 6.9%, to 25,128.17, the S&P 500 SPX, +0.42% was down 188.04 points, or 5.9%, to finish at 3,002.10, and the Nasdaq Composite COMP, +0.37% ended down about 527.62 points, or 5.3%, at 9,492.73, one day after charting a record above 10,000.
All three indexes saw their sharpest one-day drops since March 16 on Thursday. The S&P 500 and the Dow finished at their lowest levels since May 26, while the Nasdaq ended at its lowest since May 29, according to Dow Jones Market Data.
For the week, the Dow is down 7.3%, the S&P 500 was on track to lose 6%, while the Nasdaq was off 3.3%, as of Thursday’s close.
What’s driving the market?
Investors are assessing the state of the stock-market’s 10-week rally, a day after equity indexes registered a bruising decline prompted by fears of a resurgence in the coronavirus pandemic in the U.S. and a bleak economic outlook from the head of the Federal Reserve.
Indeed, the International Monetary Fund’s Gita Gopinath said that the global economy is recovering more slowly than expected and faces “significant scarring,” Bloomberg News reported. In a video released Friday but recorded June 4, Gopinath said the IMF will release updated growth projections on June 24 that will likely be worse than April projections for a global contraction of 3%, if the disease lingers.
Fears of an emerging second wave of the epidemic in the U.S. persist, with Reuters reporting that half a dozen states, including Texas and Arizona, are facing rising infections of COVID-19. Arizona, Utah and New Mexico all posted rises in new cases of 40% or higher, while Florida, Arkansas, South Carolina and North Carolina saw cases rise by more than 30% for the week ended June 7, on a rolling seven-day basis, according to Reuters.
Some analysts characterize the rebound Friday from Thursday’s slump as unlikely to be sustainable.
Naeem Aslam, chief market analyst said that it “is normal to experience some bounce next day.”
“I suspect the bounce is a dead cat bounce because the sentiment is further dented by the fresh comments by the chief economist of the IMF who said that the world economy is growing much slower than the anticipation and the scars of the coronavirus pandemic may linger for much longer,” he said.
However, a bullish investors don’t believe Thursday’s downturn signaled a unraveling of the trend higher for U.S. equities.
“The big question is where do we go from here. We had been saying for some time that we expected some corrections, but that the downside had become more limited given a still-bearish consensus, high cash levels, and a broadening rally,” wrote Esty Dwek, head of global market strategy, at Natixis Investment Managers, in emailed remarks Friday.
“We maintain this view and for now, do not believe this is the start of a new collapse,” Dwek wrote, also advocating that investors should be cautious in the road ahead.
In U.S. economic reports, a reading import prices for May rose, up 1%, by the most in more than year, marking the largest gain since February 2019, the Labor Department reported. Meanwhile, the University of Michigan’s consumer sentiment index showed an increase to a reading of 78.9 from 72.3 in May.
Meanwhile, a report on economic growth in the U.K. showed that gross domestic product contracted by a record 20.4% in April, highlighting weakness in Europe and one of the region’s hardest hit by the epidemic.
Which stocks are in focus?
- American Airlines Group Inc. shares AAL, +11.47% are in focus Friday after the company announced a series of business updates in a filing with the Securities and Exchange Commission as its demand trends and cash-burn trajectory improve. Shares were surging 18%.
- Dick’s Sporting Goods Inc. shares DKS, +4.72% jumped 6% in Friday trade after the athletic retailer said it was bringing back its dividend program.
- Bankrupt auto rental company Hertz Global Holdings HTZ, +26.45% wants to sell as much as $1 billion in stock to take advantage of its recent rally, the Wall Street Journal reported, citing the company’s lawyers. Its shares were up 47% in Friday action.
- Azek Co. AZEK, late Thursday priced its initial public offering at $23 a share, above its expected range of $19 to $21 each. The maker of sustainable building materials will offer 33.25 million shares.
- Caterpillar Inc. CAT, +0.06% was downgraded to market perform from outperform at BMO Capital Markets on concerns about the impact of tight budgets on the industrial machinery company’s comeback. Its shares gained 2%.
How are other assets faring?
Oil prices gave up slight early gains on Friday. West Texas Intermediate CLN20, -1.18% was off 8 cents, or 0.3%, at $36.24 a barrel on the New York Mercantile Exchange, after marking the worst one-day slide since April 27.
The greenback traded up 0.2% but was poised for a flat finish on the week against its major rivals, as gauged by the ICE U.S. Dollar index DXY, +0.40%.
In precious metals, August gold GCM20, +0.63% on Comex rose $8.70, or 0.5%, at $1,748.50 an ounce after jumping 1.1% on Thursday.
The 10-year Treasury note yield TMUBMUSD10Y, 0.674% rose 4.3 basis points to 0.70%. Bond prices move in the opposite direction of yields.
In global equities, the Stoxx Europe 600 index SXXP, +0.84% traded up 1.3% after ending Thursday down 4.1%, while the FTSE 100 index UKX, +0.94% rose 1.5% following its 4% Thursday plunge.
In Asia, Japan’s Nikkei NIK, -0.74% fell 0.8%, the China CSI 300 000300, +0.18% finished 0.2% higher and Hong Kong’s Hang Seng Index HSI, -0.73% closed off 0.7% lower. South Korea’s Kospi index 180721, -2.04% fell 2% after a 0.9% decline in the previous session.
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