An upbeat Monday has become something of a collector’s item in recent months, but a wave of positivity has indeed swept across stocks to start the week.
Federal Reserve Chairman Jerome Powell sent U.S. stock futures higher after saying that the central bank was “not out of ammunition by a long shot” to fight the recession, in an interview on CBS news magazine show “60 Minutes.”
Data suggesting the rate of new global coronavirus cases is slowing, and more states and countries beginning to emerge from lockdown, added to the optimism. Last week U.S. stocks suffered their biggest weekly drop in almost two months over fears of a second wave and escalating U.S.-China trade tensions.
In our call of the day, Paul Schatz, the president of Heritage Capital, said the Dow could hit 30,000 points by 2021 and 40,000 by 2023 as the U.S. economy recovers over the longer term.
“To bet against the U.S. economy and consumer over the long-term is a loser’s game,” Schatz said in a first quarter note to clients.
“I firmly believe we will see Dow 30,000 in 2021 with Dow 40,000 coming by 2023. Once we get over this massive hurdle, there will be too many things working in favor to derail that train when it gets going.”
While the other side of the coronavirus crisis will look different from life pre-virus, Schatz said the American “spending spirit” was unlikely to change. He also noted that the historic first quarter decline began with the “foundation of the market being fairly solid,” unlike in 2018, 2011, 2008 and 2000.
“20-plus% declines have always been accompanied by termites eating away at the market beneath the surface before the house falls down — we did not see the usual termite infestation this time around,” he said.
Schatz said that COVID-19 would resurface in the fall but that America would be ready this time — with tests, ventilators and medical equipment — buying time until a vaccine emerges in early 2021.
He saw a recovery in the third or fourth quarter with “back to back strong quarter of GDP growth” regaining between 50% and 80% of what was lost, while the rest would take longer as small businesses are unable to reopen and employees lose their jobs.
The markets
After closing 61 points higher on Friday, the Dow Jones Industrial Average DJIA, +0.25% was set to open with strong gains on Monday. U.S. stock futures were up after Fed Chairman Jerome Powell’s upbeat comments on Sunday. Dow futures YM00, +1.70% were 1.6%, or 380 points up, before the open while S&P 500 futures ES00, +1.62% climbed 1.6% and Nasdaq futures NQ00, +1.42% were 1.3% higher.
European stocks rallied in early trading following Powell’s comments and as data showed new coronavirus cases were growing at the slowest rate in months. The pan-European Stoxx 600 index SXXP, +2.13% rose 2%, while rising oil prices helped the FTSE 100 UKX, +2.37% 2.2% higher.
West Texas Intermediate crude oil for June delivery CLM20, +9.78% was up 8% at $31.85 a barrel early Monday, while July brent crude BRNN20, +6.61% climbed 6% to $34.40.
The buzz
Global new coronavirus cases rose 0.9% in the past day, according to Deutsche Bank, the first time growth has fallen below 1% since Feb. 24, helping stocks higher on Monday.
U.S. oil prices jumped 7% as output cuts and hopes of an upturn in demand led to signs of a modest recovery for the commodity.
Japanese technology company SoftBank SFT, +2.46% racked up a full-year loss of 961.6 billion yen ($9 billion) on red ink related to its Vision Fund investments, including WeWork and Uber.
European stock-market regulators have lifted their short-selling bans after two months, citing less turbulent conditions.
Walmart WMT, +2.04%, Alibaba BABA, +1.18% and Target TGT, +0.83% will all report earnings in the coming days and investors will see the early impact of the pandemic on U.S. retail.
Low-cost airline Ryanair RY4C, +9.28% said full-year net profit fell 27% amid the coronavirus pandemic and higher costs. The Irish carrier forecast losses for the first two quarters of the current financial year.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.
Add Comment