Before The Bell
Wall Street began the latest session to the upside, continuing a very strong recent pattern for the stock market. Once again, the early gains were fueled by optimism about the reopening of the economy, with all 50 states now in that mode, albeit to varying degrees. The early surge and strong finish would propel the major composites, led for a change by the Dow Jones Industrial Average, to levels not seen since early March. It has been a broad-based rebound for the most part, with upbeat sentiment leading actual results.
The optimism was fanned not only by the wide-scale reopening activity, but also by a sense that the economy was gaining some momentum on its own and also by an expectation that the government may offer more stimulus to bolster the recovery. In all, the Dow would surge by 511 points, the second day in succession that the blue chip index would gain more than 500 points, lifting that average back above 25,000. In all, we have gained nearly 7,000 Dow points since the late-March nadir of just over 18,000.
The latest surge in the equity market was led by such Dow components as American Express (AXP), Goldman Sachs (GS), and JPMorgan Chase (JPM). Of course, it was more than just the blue chips yesterday, as the S&P 500 Index jumped by 44 points, enabling that broader index to cross the 3,000 plateau. The NASDAQ lagged for a second day in a row on some group rotation, with weakness in the technology group accounting for that sector's underperformance yesterday.
Also doing well were the retailing stocks, as the latest round of openings will hopefully turn things around for that battered group. Not all the news was encouraging for the market, though, as the biotech sector saw headwinds in the latest session. In the news backdrop, meantime, the Federal Reserve Board issued its Beige Book summation of business activity across the country. It said that the economy weakened across the country falling sharply in some locales. Also, some laid off workers were reluctant to return to work due to safety concerns.
The Beige Book also reflected pessimism among business leaders about the potential pace of the presumptive recovery in activity. The reluctance of some workers to return to their jobs also reflected worries about child care with so many schools still shuttered. Other workers cited generous unemployment benefits as a reason for being a little cautious about returning. Also contributing to the somber tone was the plunge in real estate activity. The dour mood was affirmed by continuing weak readings on consumer sentiment.
Now, after these back-to-back big wins by the market, which, as noted, combined to send the Dow up by better than 1,000 points, investors are poised to see the stock market head in a somewhat uneven direction at the outset of trading later this morning.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
