Before The Bell
After a dramatic turnaround on Monday, in which the Dow Jones Industrial Average went from a loss of some 800 points to a closing advance of 158 points, with the blue-chip index and the other major benchmarks getting a big boost after the Federal Reserve said it would expand its bond-buying efforts, equities steamed ahead on Wall Street yesterday morning. In fact, within minutes the Dow was up by more than 800 points. Several factors led to the encore Tuesday morning.
First, there was some carry over from Monday's Fed announcement. Also, there are rumblings afoot of a massive new infrastructure project being pushed by the Administration in Washington. There also are signs that there may be some progress on the COVID-19 front with respect to treatments of people who are desperately sick. But the real impetus for the bulls to keep the market ball rolling in the latest session was a much stronger-than-expected increase in retail sales, as per the report for May.
Specifically, the Commerce Department indicated that spending surged by 17.7% last month, reversing a shocking plunge in April. The big comeback, a record one-month increase since such reports have been issued, were led by stealth gains in auto and clothing demand as car showrooms and department stores reopened across some parts of the country following the three-month lockdown. It should be noted that this sales gain was on a consecutive-quarter basis, not year to year. That comparison was still weak. Still, the Dow started the day up over 800 points.
The stock market then would give some ground back, with a disappointing release on industrial production and factory utilization dampening optimism somewhat. Although both measures of industrial activity gained ground last month, the small increases were well under expectations. This mixed data suggest that the recovery will be a checkered affair. Then, there was the Federal Reserve Chair Jerome Powell, who intoned that the central bank would only make bond purchases as needed, not in an opened-ended fashion.
Mr. Powell’s caution disappointed some more aggressive types. So, stocks gave back some of their early session advance, but stayed comfortably in the green throughout the day. At one point, the Dow had surrendered three-quarters of an early 800-point surge. However, there was sufficient equity buying into the close, and as things concluded, the blue chips were ahead 526 points, gaining some 140 points in the closing minutes. Solid gains also were tabulated by the S&P 500 and the NASDAQ.
Now, looking out to a new day and following three straight wins for the bulls after last Thursday's 1,862-point plunge in the Dow, we see that the futures are again pointing higher, with a moderately better opening now likely.
– Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
