By Geoffrey Smith
Investing.com -- U.S. stocks opened sharply higher on Tuesday after a big rebound in retail sales in May revived optimism in a rapid, 'V-shaped' recovery for the economy in the wake of the coronavirus pandemic.
The optimism was only slightly tempered by news that industrial production rebounded less in May from its collapse in April than economists had expected.
By 10:10 AM ET (1410 GMT) the Dow Jones Industrial Average was up 761 points or 3.0% at 26,524 points, while the S&P 500 was up 2.6% and the Nasdaq Composite was up 2.3%.
Retail sales surged a record 17.7% in a month in which most states began to lift their lockdown measures, while core retail sales rose by an equally impressive 12.4%. Both figures were well ahead of consensus forecasts, albeit sales were still over 8% below pre-pandemic levels, Oxford Economics analyst Greg Daco said via Twitter.
U.S. factories were less buoyant than consumers in May, however, with industrial production rising only 1.4% instead of the 2.9% expected. Moreover, data for April were revised lower to show an even sharper decline in industrial and manufacturing production than first thought.
That wasn't enough to scare off buyers who had already been encouraged by signs of fresh stimulus from the Federal Reserve on Monday. The Fed will start buying the bonds of individual companies, fleshing out its support for the corporate credit market that it had outlined in March. Federal Reserve Chairman Jerome Powell is due to start his semi-annual Congressional testimony at 10 AM ET.
Pharma giant Eli Lilly (NYSE:LLY) shone with a 12% increase on the back of clinical trial data suggesting its breast cancer drug could find broader applications.
Cyclical and travel stocks again received most of the uplift from the data. Norwegian Cruise Line (NYSE:NCLH) stock rose 8.6% and rival Carnival's (NYSE:CCL) stock rose 8.4%. Both companies recently undertook capital increases to stave off short-term debt concerns. Airline stocks were also back in fashion, with Spirit Airlines (NYSE:SAVE) stock rising 8.9%, American Airlines (NASDAQ:AAL) rising 6.5% and United Airlines (NASDAQ:UAL) rising 6.3%.
Tech stocks, which have kept their valuations better than old-economy stocks during the pandemic, also rose, though not as sharply. Amazon.com (NASDAQ:AMZN) stock rose 1.7% to within touching distance of a new all-time high, while Apple (NASDAQ:AAPL) stock rose 2.8%, shrugging off news of two new EU antitrust investigations against it.
Oil and gas stocks also rose on hopes that the recovery will be strong enough to underpin a sustained rebound in U.S. demand. Occidental Petroleum (NYSE:OXY) stock rose 9.1%, while U.S. Crude futures rose 5.0% to $38.97 after the International Energy Agency raised its demand forecasts for 2020 and 2021.