Facebook, Amazon rally to new all time highs.
The benchmark S&P 500 stock index closed at a 10-week high Wednesday, following upbeat quarterly results from retailers Target and Lowe’s that had investors focused on American businesses reopening and the coronavirus pandemic beginning to recede.
But stocks came off the session’s best levels as a bill to delist Chinese companies on U.S. exchanges cleared the Senate.
How did benchmarks fare?
The Dow Jones Industrial Average US:DJIA advanced 369.04 points, or 1.5%, to finish at 24,575.90. The S&P 500 US:SPX climbed 48.67 points, or 1.7%, to end at 2,971.61, its highest close since March 6, according to Dow Jones Market Data. The Nasdaq Composite US:COMP rose 190.67 points, or 2.1%, closing at 9,375.78.
On Tuesday, the Dow fell 390.51 points, or 1.6%, to end at 24,206.86, near a session low, while the S&P 500 index shed 30.97 points, or 1.1%, to finish at 2,922.94. The Nasdaq Composite Index declined 49.72 points, or 0.5%, to close at 9,185.10.
The Nasdaq is only a 4.5% away from its all-time record high in February, supported by recent strength in technology and internet stocks during the coronavirus pandemic.
What drove the market?
Investors focused on the positives and directed their attention to wider reopening plans that are taking place throughout the U.S. Many states have been lifting restrictions on business and personal activity ahead of the Memorial Day holiday next Monday.
Lowe’s Cos. US:LOW also reported sales and profit significantly above expectations, while Target Corp. US:TGT beat estimates on revenue and sales growth, with digital sales soaring 141%, underscoring some resilience among the retail sector’s biggest companies during the coronavirus pandemic.
Gains were led by technology stocks with Facebook US:FB shares advancing 6% to finish at a record high. Amazon US:AMZN shares also hit an all-time record, closing higher by 2%. However, energy, financials and industrial sectors were all higher too.
“There are still consumers with jobs that still feel secure,” said Quincy Krosby, chief market strategist at Prudential Financial, in an interview.
She pointed to new mortgage applications that rose 6% last week, according to data from the Mortgage Bankers Association. “You don’t start the mortgage application process unless you feel financially secure,” said Krosby.
Still, investors may have to contend with a long, uneven road toward recovery from prospective recession.
“You have an undecided market,” Peter Cardillo, chief market economist at Spartan Capital Securities, told MarketWatch. “One day it’s risk on, the next it isn’t. But the market certainly doesn’t want to fall apart, and it doesn’t want to explode on the upside either.”
Financial markets have been supported by the Federal Reserve’s programs to combat the coronavirus crisis and the increase in its balance sheet to nearly $7 trillion.
Minutes of the Fed’s last policy meeting in April published Wednesday showed officials also discussed how to convince markets that interest rates will stay low for a long time.
Kathy Jones, chief fixed income strategist, at Schwab Center for Financial Research, said the Fed could use yield control measures to tamp down any volatility that crops up in long-term rates, as the Treasury Department looks to finance its fiscal deficit which is likely to hit $3.7 trillion this fiscal year or about 18% of GDP.
“The one thing they clearly don’t want to do is negative interest rates,” Jones said Wednesday during a press briefing.
However, stocks came off the session’s best levels Wednesday after a bill to delist Chinese companies on U.S. exchanges cleared the Senate.
The Senate approved the Holding Foreign Companies Accountable Act, which seeks to force Chinese companies to adhere to U.S. securities law, ultimately by barring many from listing shares on U.S. exchanges, or otherwise raising money from American investors. The bill still would need to pass the Democratic-controlled House of Representatives before reaching the president’s desk to be signed into law.
Which stocks were in focus?
- Moderna Inc. US:MRNA, the preclinical biotechnology company developing one of the front-running COVID-19 vaccine candidates in the U.S., was in the spotlight again Wednesday, saying full data on its clinical trial process will be forthcoming, a day after the company came under criticism for a lack of such disclosures. Shares ended 2.5% higher.
- Tesla Inc. US:TSLA eked out an 0.9% gain as the electric-vehicle maker said it will raise the price of the “full self-driving” option on its electric vehicles worldwide by $1,000 starting July 1.
- Facebook, Inc. US:FB shares soared 6% to a record high Wednesday, a day after it unveiled a new e-commerce site.
- Luckin Coffee Inc. US:LK resumed trading Wednesday, after Nasdaq Inc. US:NDAQ halted trading of the company’s stock April 7. Luckin Coffee received a delisting notice from the exchange platform May 15 because of “public interest concerns” related to “fabricated” transactions disclosed by the company in its annual report. Its shares tumbled 35.8%.
- Johnson & Johnson Inc. US:JNJ said late Tuesday it will stop selling talc-based baby powder in North America following a flurry of lawsuits alleging the product causes cancer. Shares fell 0.9% Wednesday.
- Shares of Lowe’s gained 0.1% Wednesday, after the home improvement retailer reported fiscal first-quarter profit and sales rose well above expectations, and said the sales momentum has continued into May.
- Target beat first-quarter earnings and revenue expectations with help from its digital sales capabilities as e-commerce grew by 141% during the period.
- L Brands Inc. US:LB Take-Two Interactive Software Inc. US:TTWO and Expedia Group Inc. US:EXPE are slated to report after the end of Wednesday’s regular session.
- Clorox Co. US:CLX said its board has approved a 1.1% increase in its quarterly dividend to $1.11 a share from $1.06.
- Shares of McKesson Corp. US:MCK rose 1.2% Wednesday, after the retail pharmacy and health care services company reported fiscal fourth-quarter earnings that beat expectations, but provided a downbeat earnings outlook citing “anticipated headwinds” as a result of the COVID-19 pandemic.
- Shares of Inovio US:INO gained 8.5% on Wednesday after the company said its COVID-19 vaccine candidate demonstrated neutralizing antibodies in animals.
- Shares of Aurora Cannabis Inc. US:ACB tumbled 13% as investors have parsed its negative Ebitda and focused on better-than-expected revenue, wrote analysts Rahul Sarugaser and Michael Freeman.
- Shares of Royal Caribbean Cruises Ltd. US:RCL fell 3.4% Wednesday, even after the cruise operator swung to a first-quarter loss that was wider than expected as the COVID-19 pandemic led to cruise suspensions, but said 2021 bookings remained within historical ranges.
How did other markets trade?
U.S. government bond yields were lower, with the 10-year Treasury note BX:TMUBMUSD10Y down 3.2 basis point at 0.679% on Wednesday, after the first sale of 20-year government debt since 1986. Bond prices move inversely to yields.
The U.S. dollar weakened against a basket of its major rivals, with the ICE U.S. dollar index US:DXY trading down 0.2%.
In precious metals, gold futures for June delivery US:GCM20 rose $6.50, or 0.4%, to settle at $1,752.10 an ounce. Crude prices for July delivery US:CLM20 US:CL soared to a 10-week high, adding $1.53 cents, or 4.8%, to finish at $33.49 a barrel, after weekly data showed U.S. crude supplies falling by 5 million barrels.
In global equities, the Stoxx Europe 600 index XX:SXXP gained 1%, while the FTSE 100 UK:UKX rose 1.1%.
In Asia trade, Japan’s Nikkei JP:NIK rose 0.8%, Hong Kong’s Hang Seng HK:HSI advanced less than 0.1%, the Shanghai Composite Index CN:SHCOMP closed down 0.5%, as did the CSI 300 Index XX:000300.