Wall Street ended its best quarter since Tuesday 1998 with more gains, a fitting end to an impressive three months for investors as the market screamed to record heights after a torrid decline.
The S&P 500 rose 1.5%, taking its profit for the quarter to almost 20%. That rebound followed a 20% drop in the first three months of the year, the worst quarter in the market since the 2008 financial crisis. The drop came as the coronavirus pandemic ended the economy and millions of people lost their jobs. .
“It’s the first time it’s had consecutive (quarters) like this since the 1930s,” said Willie Delwiche, investment strategist at Baird. “It is quite unprecedented.”
The whiplash that swept through markets in the second quarter came as investors looked past dire unemployment figures and grew increasingly hopeful that the economy could emerge from its sudden and severe recession relatively quickly. Hopes seemed prophetic after reports during the quarter showed that employers resumed hiring again and retail sales rebounded as governments relaxed closing orders aimed at curbing the spread of the coronavirus.
The quarter’s earnings were fueled by promises of large amounts of aid from the Federal Reserve and Capitol Hill. Low interest rates generally push investors toward stocks and away from low bond payments, and the Federal Reserve has set short-term interest rates at their all-time low of nearly zero.
But most of Wall Street says don’t expect anything close to a repeat of the second quarter. An increase in infections has several states that pause the lifting of restrictions. The increase in new confirmed cases, which has led the European Union to ban the entry of American travelers, is raising doubts that the economic recovery may occur as fast as the markets had predicted. That helps explain why market momentum cooled somewhat in June.
On Tuesday, Dr. Anthony Fauci, the country’s leading infectious disease expert, warned that the number of reported new daily infections could rise to 100,000 if Americans don’t start to follow public health recommendations.
Beyond the coronavirus, analysts also point to the upcoming US elections and other risks that could alter markets. If Democrats sweep the Capitol and the White House, which many investors see as least possible, could mean higher tax rates, which could weaken corporate profits.
The S&P 500 gained 47.05 points to 3,100.29 on Tuesday. The Dow Jones Industrial Average increased 217.08 points, or 0.9%, to 25,812.88. It had briefly dropped 120 points. The Nasdaq compound rose 184.61 points, or 1.9%, to 10,058.77.
The S&P 500 rebounded to about 8.4% from its record set in February, after dropping nearly 34% in late March. At one point earlier this month, it had risen as close as 4.5%.
Tech, healthcare and financial companies drove much of the broad market earnings on Friday. The purchase accelerated after a report showed a stronger-than-expected improvement in consumer confidence this month.
“Overall, the market is reacting to economic data that is better than expected,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management.
Schutte said the market is being backed by the likelihood that there will be no nationwide shutdown again, aggressive monetary policy, and hopes for a vaccine sooner rather than later. “The path of least resistance is still two steps forward, one step back,” he said.
The quarter posted steady gains in tech stocks, which were up 27.6%, second only to the 30.2% gain for the consumer discretionary sector. And airlines and cruise operators traded wildly after being mistreated for much of the first quarter.
Apple, once again the most valuable company in the S&P 500, gained 43.5% for the second quarter, American Airlines rose 7.2% during the quarter, while Royal Caribbean Cruises jumped 56.4%. Still, each of them remains close to 60% during the year.
Crude oil rebounded similarly to stocks during the second quarter, although it is still well below where it was before the pandemic occurred. Power companies had a solid comeback, with three power companies: Apache, Halliburton and Marathon Oil, which showed the highest percentages of earnings for the quarter.
The barrel of US crude oil slid 43 cents to settle at $ 39.27 on Tuesday, but it is still almost double where it was at the end of the first quarter. It is also in a different world than April, when prices in one corner of the US crude oil market briefly fell below zero amid concerns that falling demand would leave no place to store. all unused oil. Brent crude fell 56 cents to settle at $ 41.15 a barrel.
The yield on the 10-year Treasury rose to 0.66% from 0.63% late on Monday. It also bounced back from its lows when recession concerns were at their peak. It set a record low in March when it briefly dropped below 0.50%, according to Tradeweb. Yield tends to move with investor expectations for the economy and inflation.
European stocks closed mixed, and Asian markets ended higher.
