The stock market finished higher on Wednesday as optimism about reopening the economy offset concerns about the coronavirus pandemic, U.S.-China trade tensions and nationwide protests over the death of George Floyd.
Wall Street is clinging to optimism for a smooth economic reopening.
Wang Ying/Xinhua News Agency/Getty Images
The Dow Jones Industrial Average was up 2%, over 500 points, on Wednesday, while the S&P 500 rose 1.4% and the tech-heavy Nasdaq gained 0.8%.
Stocks posted a third straight day of gains, moving higher on optimism about reopening the economy and despite widespread civil unrest across the country stemming from the death of George Floyd.
Investors don’t see the mass protests as a threat to either corporate earnings or an economic recovery, at least not yet: The S&P 500 is up over 3% since the unrest began on May 26.
The market got a boost Wednesday from better-than-expected economic data: ADP and Moody’s Analytics reported that private payrolls fell by another 2.76 million in May—far less than the 8.75 million expected.
“The good news is I think the recession is over, the Covid-19 recession is over, barring another second wave, a major second wave, or real serious policy errors,” Moody’s chief economist Mark Zandi told CNBC. The bad news, however, is that “the recovery will be a slog until there’s a vaccine.”
Stocks that would directly benefit from a reopening continued to rally on Wednesday, including airlines, cruise operators, casinos, banks and some retailers.
Zoom shares surged another 7% on Wednesday after the company reported a 169% increase in revenue during the first quarter; the stock is up over 200% so far in 2020.
“Good news on vaccines helped stocks in May, but U.S.-China relations and civil unrest could steal the spotlight in June,” warned Lori Calvasina, chief U.S. equity strategist for RBC Capital Markets, in a recent note. “The S&P 500 remains highly news flow driven.”
“It is still hard to get comfortable with valuations while the fundamental narrative is growing increasingly disconnected with reality,” argues Vital Knowledge founder Adam Crisafulli. Many investors are inaccurately conflating reopening with economic normalization, he says, and several risks looming on the horizon (think rising U.S.-China tensions) are being ignored.
The market is moving steadily higher so far in June, building on back-to-back monthly gains. Both the Dow and S&P rose more than 4% in May, after rallying more than 11% in April. The S&P is now up over 40% from its coronavirus crisis-level low on March 23.