Before The Bell
After turning around late on Monday, on hopes that the nation's economy would soon start to reopen in a fairly big way, the stock market extended that rebound yesterday morning, with a strong-across-the-board advance in equities. That upturn would extend itself as the morning continued, with the Dow Jones Industrial Average surging to a gain of 420 points as noon arrived in New York. The S&P 500 Index also was climbing, as was the tech-driven NASDAQ. It was the second day in a row this composite was leading the way, and again on strength in tech.
As was the case on Monday, stocks rose on hopes that the nation's economy could start to reopen shortly, In response, oil prices gained further upward momentum, rising for a fifth day in succession. Holding stocks back from even bigger gains were fears about a second wave of coronavirus cases as loosened restrictions on the business community could prompt new disease outbreaks. Clearly helping the market yesterday were gains in energy stocks, which rallied on recovering oil quotations, and a further rally in big tech names.
Meanwhile, not all of the news was constructive, as Wall Street is having concerns now about rising tensions between the United States and China, as our country has been threatening new tariffs on China over its handling of the coronavirus epidemic. In other news related to Covid-19, drug giant Pfizer (PFE) is starting trials on an experimental coronavirus vaccine. As to the market, the morning rally was continuing as the afternoon moved along, albeit with somewhat less intensity.
The rally would persist as we entered the middle of the afternoon trading session. Meantime, among individual issues, Starbucks (SBUX) posted a gain, as the coffee retailer's CEO unveiled a plan to reopen 85% of its U.S. stores.
On the other hand, what little economic news there was remained bleak, as the services sector reported its biggest contraction since 2009. The Institute for Supply Management, for example, noted that its non-manufacturing index dropped from 52.5 in March to 41.8 in April. In March of 2009, the index stood at 40.
The advance would continue into the late afternoon. In fact, as late as 3:00 PM EDT, the Dow was still ahead by almost 400 points and the NASDAQ was up by close to 200 points. However, the sellers would come into the market during the last hour and quickly cut the NASDAQ's advance in half, while the Dow, once ahead by more than 400 points, would end matters with a much more modest advance of 133 points, leaving that composite back below 24,000, at 23,883. Comments from a Federal Reserve official on the likely need for more stimulus hurt sentiment near the close of trading.
Looking out at a new day now, and after a second win for the bulls in as many days, we see that the stock market is poised to open this morning to the upside on optimism about the pending reopening of the economy. At the same time, we note that after the close of trading yesterday entertainment behemoth and Dow component Walt Disney (DIS) reported dour quarterly results, missing analyst targets. The company also said it will forgo its dividend payment in July. The stock is likely to open lower today, in response.
— Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in DIS and PFE.
