It looked set to be a shaky start to the quarter on Wednesday, until Pfizer PFE, +3.18% announced positive trial results for a potential coronavirus vaccine. Shaking off pre-market declines, U.S. stocks moved higher, building on the best quarter in decades.
The Dow DJIA, -0.30% booked its best quarter since 1987, while the S&P 500 SPX, +0.50% posted its best performance since 1998 and the Nasdaq Composite COMP, +0.95% since 1999, as the economy began to reopen after the coronavirus lockdown.
The first two quarters of the year couldn’t have been more different and uncertainty is still heightened, with a number of U.S. states reversing their reopenings and reporting virus spikes.
In our call of the day, SunTrust Advisory chief market strategist Keith Lerner said that while history was “only a guide,” he expected it to be repeated with the onset of a bull market and the S&P 500 higher in a year’s time. He expected an uneven path for the index, as the economy reopens in “fits and starts,” but one with a positive trajectory.
The S&P 500’s second-quarter gain of 20% makes it the fourth-best quarter since 1950, Lerner said in a note. Following the top 10 best quarters since 1950, the index has climbed every time in the next quarter with an average 8% jump. On three occasions — in 1970, 1998 and 2009 — the strong quarter was also preceded by a double-digit percentage fall, as it was this time around.
The index was higher one year later following nine out of the 10 best quarters, with the exception of the 1987 stock market crash, SunTrust’s study found.
Lerner warned markets wouldn’t track the past exactly, and stressed there was great uncertainty around the pandemic and “wider-than-normal” potential outcomes.
“That said, the weight of the evidence in our work still suggests that we are in a bull market — a bull market that has further to go but became stretched to the upside on a short-term basis in early June,” he said.
“While the fits and starts in the economy and other factors will likely lead to periodic market setbacks, our work suggests this bull market continues to earn the benefit of the doubt, and we retain a positive 12-month outlook,” he added.
Lerner said the S&P 500’s path since the March lows was tracking the 1982 and 2009 bull markets — with two pullbacks of more than 5% already.
The tweet
Hong Kong police made the first arrest under the new national security law on Wednesday, according to a tweet posted by the force. Under the new law crimes of secession, subversion terrorism and collusion with foreign forces carry a minimum sentence of three years and a maximum of life. Inciting hatred of China’s central government and Hong Kong’s government are also now crimes.
The market
After rallying to end the best quarter in decades on Tuesday, U.S. stocks reversed early losses on Wednesday to begin the new quarter as they left the last. BioNTech BNTX, -3.89% and Pfizer’s update that all 24 participants in the Phase 1/2 clinical trial for a vaccine candidate had developed neutralizing antibodies, sparked the turnaround. The Dow rose 0.3%, the S&P 500 climbed 0.6% and the Nasdaq was 0.9% higher into the afternoon. Asian markets were mostly higher off the back of Wall Street’s rally. European stocks, which had their best quarter since March 2015, also made gains SXXP, +0.23% after initially falling.
The buzz
The chief financial officer of videoconference company Zoom ZM, +2.20% will reveal how the company dealt with the COVID-19 crisis, and managed explosive growth, at the Barron’s Investing in Tech conference on Wednesday
Plant-based meat maker Beyond Meat has announced plans to make its Beyond Burger available in China, through a partnership with Alibaba in the technology giant’s futuristic Freshippo supermarkets.
A new virus emerging in Chinese pig farms has “all the essential hallmarks” of a pandemic, according to researchers.
European plane maker Airbus said on Tuesday it will cut about 15,000 jobs by next summer to “resize” its workforce and operations following the coronavirus pandemic.
U.K. supermarket chain J Sainsbury reported strong retail sales in the first quarter, boosted by online and grocery sales.