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Dow Pares Some Gains, but Signs of Economic Recovery Keep Bulls Alive

Stock Markets Jun 16, 2020 04:01PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com - The Dow closed higher despite paring some gains Tuesday, as investor sentiment was lifted by data suggesting the economy is on the road to recovery, but gains were kept in check by lingering fears a second wave of the Covid-19 pandemic could be ahead following a sharp uptick in infections in the U.S. and other parts of the world. 

The Dow Jones Industrial Average rose 2%, or 526 points, though had climbed by 838 points intraday. The S&P 500 gained 1.91%, while the Nasdaq Composite added 1.8%.

Retail sales surged 17.7% in May, rebounding from a record slump in April. The better-than-expected data suggested that consumer spending is on the mend, though some on Wall Street remained wary over whether the momentum was likely to continue.

"The comeback was much faster than expected, and looks like a beginning of a v-shaped recovery in consumer spending. That's assuming the positive momentum is sustained, something we remain skeptical about," Jefferies (NYSE:JEF) said in a note.

Retailers including Macy’s (NYSE:M), Gap (NYSE:GPS) and Nordstrom (NYSE:JWN) surged on the back of the strong retail sales report.

Monetary policy was also in focus as Federal Reserve chairman Jerome Powell cooled some hopes that the central bank's corporate bond-buying program, which kicked off today, would be aggressive.

Powell also touted signs of a recovery, though continued to stress that the outlook remains uncertain amid a lack of visibility about the trajectory of the disease. "Until the public is confident that the disease is contained, a full recovery is unlikely."

Virus hospitalizations in Texas rose 8.3% overnight to hit a record. Florida’s Department of Health on Tuesday reported that daily infections rose 2,783 overnight to a record high in the state.

In China, meanwhile, a wave of infections in Beijing forced the government to impose stricter measures, including the shut down of all schools, to curb the outbreak. 

Hopes of an effective coronavirus treatment were given a boost, meanwhile, after researchers in the U.K. released clinical data showing that steroid, Dexamethasone, had reduced deaths among the sickest Covid-19 patients.  Dexamethasone reduced the death rate of patients on a ventilator by 35%, and by 20% for patients who needed oxygen but were not ventilated, according to the study. 

The results were "very positive," but still need to be validated, Scott Gottlieb, a former commissioner of the U.S. Food and Drug Administration, told CNBC.   

Energy led the broader market gains, underpinned by a rise in oil prices after the International Energy Agency lifted its oil demand forecast for 2020.  

The IEA upgraded its estimate on oil demand to 91.7 million barrels per day (bpd) in 2020, 500,000 bpd higher than its previous forecast.

In technology, Apple (NASDAQ:AAPL) climbed 2.6% after Citigroup (NYSE:C) increased its price target on the stock to $400 per share from $310 per share, citing numerous tailwinds, including upside from tech giant's wearables business.

Elsewhere, industrials and construction stocks were pushed higher on reports that the Trump administration is preparing $1 trillion infrastructure program to spur economic growth.

Dow Pares Some Gains, but Signs of Economic Recovery Keep Bulls Alive
 

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Comments (17)
Joe Ruscigno
Joe Ruscigno Jun 16, 2020 11:32PM ET
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Before it’s all over the fed will buy every share of that exists. Right now they’re working on the bonds.
Hayrettin Cetinturk
Hayrettin Cetinturk Jun 16, 2020 10:37PM ET
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bears are waiting for the first sign off homerun
Hayrettin Cetinturk
Hayrettin Cetinturk Jun 16, 2020 10:35PM ET
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what signs?
Luke Aye
Luke Aye Jun 16, 2020 9:33PM ET
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If bulls are alive, bears are?
Pwr Strk
Pwr Strk Jun 16, 2020 8:54PM ET
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there should not be a BUT in pairing gains and bulls staying alive
Pwr Strk
Pwr Strk Jun 16, 2020 8:54PM ET
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hahah, never mind people
munnu jay
munnu jay Jun 16, 2020 8:35PM ET
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The bullish case for the market is pretty thin. Hopes are high for a full reopening of the economy A vaccine A rapid return to economic normalcy.  2022 earnings will be sufficiently high enough to justify “current” prices. (Let that sink in – that’s two years of ZERO price growth.) The Fed. In actuality, the first four points are rationalizations. It is the Fed’s liquidity driving the market.
munnu jay
munnu jay Jun 16, 2020 8:35PM ET
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article https://realinvestmentadvice.com/technically-speaking-bulls-bears-square-off-at-the-line/  its only the FED driving the market, they cannot even let the market go down for a day
Lalit Mahajan
Lalit Mahajan Jun 16, 2020 8:30PM ET
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30000 by November
munnu jay
munnu jay Jun 16, 2020 8:14PM ET
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what recovery, where are the jobs ?
Ross Dre
Ross Dre Jun 16, 2020 8:14PM ET
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Excellent comment!
Plopseven Schwartz
Plopseven Schwartz Jun 16, 2020 8:14PM ET
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I’ve been waiting on an unemployment check for more than three months. It’s real bad.
Ha Has
Ha Has Jun 16, 2020 8:10PM ET
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I think stocks are going higher. By end of July, COVID will be a trivial thing. People already out and about, shopping and enjoying themselves. Most people are not even wearing masks. Powell should just shut his hole, because every time he mumbles the market stumbles. All what he says is CNN-like ***
Mehdi Mbv
Mehdi Mbv Jun 16, 2020 8:10PM ET
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lol i agree on Powell.....i Said the same
Zhikang Sim
Zhikang Sim Jun 16, 2020 7:34PM ET
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this moment USA not afaid of second wave virus attack?
Jin News
Jin News Jun 16, 2020 7:34PM ET
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Money talks
Brady Murray
Brady Murray Jun 16, 2020 7:34PM ET
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Correct. We are gonna roll through it. Lots of good news on treatments and a more prepared medical system.
Thor Gao
Thor Gao Jun 16, 2020 7:34PM ET
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Brady Murray  fake news like Gilead and vaccine just two months ago. Good news..... hope so
 
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