U.S. stocks traded sharply higher Tuesday afternoon, following a long holiday weekend, as investors were emboldened by fresh coronavirus vaccine news and signs that global economies are slowly starting to crawl back from the pandemic shutdown.
How are benchmarks trading?
The Dow Jones Industrial Average DJIA, +2.74% climbed 678 points, or 2.8%, to 25,141, while the S&P 500 index SPX, +1.89% rose 57 points, or 2%, to 3,012, while the Nasdaq Composite COMP, +0.94% gained 95 points, or 1%, to 9,419.
The Dow and S&P 500 index are now at their highest levels since early March, with the S&P 500 on pace to close above its 200-day moving average for the first time since March 4, 2020.
What’s driving the market?
Investors were focusing on positive signs in the global economy, news of the gradual removal of economic restrictions related to COVID-19 and signs that Americans are beginning to feel safe enough to travel and congregate in larger groups.
“It’s all about optimism for the economy reopening,” said Megan Horneman, portfolio strategist at Verdence Capital Advisors. “That’s the big driver for the market today.”
Travel related stocks were surging in the U.S. and Europe on data showing an increase in U.S. air travel and after news that a German airline will resume flights in July as travel restrictions are lifted in Spain. The U.S. Global ETF Jets JETS, +11.75%, which tracks the airline industry, was up 11.3% Tuesday afternoon.
Data from booking platform OpenTable shows Americans were returning slowly to restaurants in some parts of the country, The Wall Street Journal reported, along with numbers showing freight trucking activity picking up in recent weeks. The New York Stock Exchange trading floor also partially reopened Tuesday, with plexiglass barriers to keep traders apart and capacity limited to one quarter its pre-virus levels.
Apple Inc. AAPL, +0.18% said Tuesday that it would reopen dozens of U.S. stores as more regions begin to lift restrictions on business operations amid the COVID-19 outbreak.
Sahak Manuelian, managing director of equity trading at Wedbush Securities, also called the global monetary and fiscal stimulus aimed at blunting the economic carnage from the coronavirus “something we’ve never seen,” adding that the trillions “sloshing around today, just in the U.S.” has helped push equities higher. “The money has to find a home.”
Twitter TWTR, +4.71% is up for the 8th straight day, on pace for its longest winning streak since April 9, 2019, when it rose for nine straight trading days, while Facebook FB, +0.04% is up for the 8th straight day, on pace for its longest winning streak since September 21, 2015, when it rose for 11 straight trading days, according to Dow Jones Market data.
Also viewed as a positive, late-stage biotech company Novavax Inc. NVAX, +7.63% said it has started human trials of its vaccine candidate in Australia. The first phase of the placebo-controlled study will enroll 135 healthy adults and the preliminary round of data from that study is expected in July. Big drugmaker Merck & Co. MRK, +1.84% also said it will soon have two potential vaccines under its umbrella and an experimental drug against the coronavirus, joining rivals in the frantic search for medicines.
There are 10 vaccines in clinical evaluation and 114 in preclinical evaluation, according to a running tally by Fundstrat.
“There’s a hope trade,” said Manuelian of the sharp, global rally in equities. “It doesn’t seem that it’s going to be one company with a vaccine,” he told MarketWatch. “I think there’s going to be plenty of opportunity for different companies to come out with their own formulations.”
However, amid the race for a medical breakthrough, the World Health Organization’s top health expert warned of a long battle to contain the pandemic. “We’re right in the middle of the first wave globally,” said WHO executive director Dr. Mike Ryan. “We’re still very much in a phase where the disease is actually on the way up,” Ryan said, pointing to South America, South Asia and other parts of the world.
Meanwhile U.S.-China relations remain tense. The country on Monday denounced a U.S. move to expand a so-called entity list of Chinese companies, which are restricted from doing business with U.S. firms, for alleged human rights abuses in the Xinjian Uighur Autonomous region.
White House national security adviser Robert O’Brien warned Sunday that the U.S. will likely sanction China if it carries through with plans for new national security laws in Hong Kong, where protests have reignited. It adds to Washington’s unhappiness over how China has handled the coronavirus outbreak. Also Sunday, China’s foreign minister Wang Yi cautioned against some political forces in the U.S. trying to push the two countries toward a “new Cold War”.
In U.S. economic data Monday, the Chicago Fed’s national activity index registered at a negative 16.74 in April, down from a revised negative 4.97 in March. The S&P CoreLogic Case-Shiller index showed home prices on a national level rose 4.4% annually in March, up from 4.2% in February.
The Conference Board’s consumer confidence index rose in May to 86.6, just shy of the median forecast of 86.8, according to a MarketWatch poll of economists. New home sales rose in April, despite coronavirus-related shutdowns, to a seasonally-adjusted annual rate of 623,000 well above the expectations of 480,000.
Read:Housing-market ETFs jump on rosy homebuilder report
Which stocks are in focus?
Airline and travel-related stocks were trading higher Tuesday. Shares of Carnival Corp. CCL, +13.34% and Norwegian Cruise Line Holdings Ltd. NCLH, +15.43% were up 13% and 15%, respectively, while American Airlines Group Inc. AAL, +15.82%, Delta Air Lines Inc. DAL, +12.20% and United Airline Holdings, Inc. UAL, +16.22% were surging between 10% and 16%.
Boeing Co. BA, +5.97% stock gained 5.6%.
Shares of AutoZone Inc. AZO, +1.40% were up 0.5% after the auto parts retailer reported fiscal third-quarter profit and sales that beat expectations.
Shares of Take-Two Interactive Software Inc. TTWO, -5.44% fell 5.3% even as BMO Capital Markets analyst Gerrick Johnson upgraded the stock to outperform from market perform.
How are other markets trading?
Crude oil prices CLN20, +1.86% were rising, with the price of a barrel of July West Texas Intermediate crude added 62 cents, or 1.9% to $33.87. In precious metals, gold GCN20, -1.59% for June delivery fell $29.90, or 1.7% to settle at $1,705.60 an ounce.
The U.S. dollar fell against a basket of its major rivals, with the ICE U.S. dollar index DXY, -0.82% trading down 0.9%.
Government bond yields were ticking higher, as the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, 0.699% climbed about 4 basis points to 0.7%.
European stocks finished higher. The Stoxx Europe 600 SXXP, +1.08% advanced 1.1%, ending at 348.92, its highest closing level since March 6, while the FTSE 100 UKX, +1.24% gained 1.2%. Asian stocks closed higher overnight across the board, led by a 2.8% rally for the Nikkei 225 index NIK, +2.55%. Hong Kong’s Hang Seng Index HSI, +1.88% rose 2%, while the China CSI 300 added 0.9%.
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