Market Description
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US stocks on Monday afternoon were trading higher to start the first full week in July, with stocks from tech and financial companies boosting earnings on Wall Street after Chinese equity benchmarks posted their biggest close. in two years.
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Monday’s upbeat market action contrasts with a continued rise in US coronavirus cases and growing concern over the re-imposition of trade restrictions to contain the viral outbreak.
How are the benchmarks working?
The Dow Jones Industrial Average (DJIA) rose 357 points, or 1.4%, to 26,184, while the S&P 500 (SPX) rose 37 points, or 1.2%, to 3,168. The Nasdaq Composite Index (COMP) rose 194 points, or 1.9%, to 10,401, after setting a new intraday record of 10,462 at the start of the session.
The Dow ended last week’s shortened vacation period by 3.3%, the S&P 500 posted a weekly gain of 4%, while the Nasdaq returned 4.6%, after closing at a record Thursday.
The US market closed Friday in celebration of the Independence Day holiday.
What is driving the market?
US stocks rose sharply Monday afternoon, led by stocks of tech and financial companies after Wall Street followed the Chinese equity markets.
Goldman Sachs Group Inc. (GS) Shares were up nearly 5% on Monday afternoon, which led to the top notch Dow, along with Boeing co. (BA) and Walgreens Boots Alliance atC. (AMB)
But Monday’s gains also came amid growing investor doubts about the US’s ability to contain the viral outbreak and its biggest economic impact, after COVID-19 cases escalated in the US USA During the weekend of July 4.
Coronavirus update: Cases in the US Reach 2.9 million and the death toll exceeds 130,000, as 38 states see cases on the rise:
“This is putting the United States on a very different restart path than that of most Western countries and much of Asia,” a team at the BlackRock Investment Institute led by chief investment strategist Mike Pyle warned Monday. global.
While the BlackRock team praised the coordinated US fiscal and monetary response in March, it also warned that “the resurgence of the virus is occurring just as Congress and the White House face a critical decision about whether to extend a series of crisis measures, including additional federal unemployment benefits, will expire at the end of July. “
Kristina Hooper, Invesco’s top global market strategist, also warned that recent improvements on the US unemployment front and surprisingly better economic data could be derailed in the coming months if policy makers become accommodating in their response. to increasing COVID-19 infections.
“In my opinion, more fiscal stimulus is clearly needed as much of the stimulus already in place is very temporary in nature,” Hooper wrote in a customer note. “Additionally, we are seeing an increasing number of companies announcing layoffs and filing for bankruptcy, while others are voluntarily closing stores again.”
In US economic data, the Institute for Supply Management reported that its index of service sector companies rose to 57.1 in June from 45.4 in May, marking the largest increase since the survey was created in 1997. Economists MarketWatch respondents expected a reading of 51. Any number greater than 50 represents an expansion of economic activity.
However, there were doubts that the positive sentiment could be sustained.
“Thousands of retail stores, bars, and restaurants are closing, or will soon be, after the coronavirus pandemic stopped traffic flow and reduced sales and revenue and led many companies to financial bankruptcy, and yet purchasing managers say the outlook for service to the sector is looking up, ”said Chris Rupkey, chief financial economist at MUFG.
Market bulls have attributed the stock surge to optimism about a sharp or V-shaped economic recovery in the US and Asia, largely due to the global fiscal and monetary stimulus that helped markets. to rebound from the depths of its half – March massive sale.
Beyond the rise in infections in the US, the optimism reflected in the stocks on Monday also comes despite the Goldman Sachs economists lowering their already depressing forecast for US internal growth in 2020 to 4.6% negative, from a previous forecast of a 4.2% drop, pointing to the replacement of COVID-19 restrictions on commercial activity. For 2021, the bank sticks to its growth forecast to recover 5.8%.
In Asian hours on Monday, Chinese stocks rose, with the flagship Shanghai Composite (CN: SHCOMP) finishing 5.7%, to the highest level since 2018 and the CSI 300 Index (XX: 000300) reserving similar performance. , after an editorial cover in a state-owned newspaper, the China Securities Journal, said promoting a “healthy bull market” is important, according to a translation.
The surge in stocks comes as China rejects sanctions and criticism of its decision to impose a national security law in Hong Kong, a crackdown that has led to reprimands from several countries, including the United States and Canada.
What actions are in focus?
- Buffett’s Berkshire Hathawa and (BRK) (BRK) agreed to purchase natural gas transmission and storage assets from Dominion Energy (D) for about $ 10 billion, including debt, after the investor refrained from buying assets during the public health crisis thus far. Berkshire Hathaway shares were up 2.3%.
- Actions of Tesla Inc. (TSLA) was up nearly 10% on Monday after an JP Morgan analyst raised its share price forecast for the electric vehicle maker, thinking it was holding well below the company’s current value.
- Actions of Regeneron Pharmaceuticals Inc. (REGN) gained 0.6% after the drug maker said it had started a phase 3 clinical trial testing an antibody cocktail to prevent COVID-19.
- Uber Technologies Inc. (UBER) will buy the Postmates food delivery service for around $ 2.65 billion, according to media reports. The shares of the transportation company rose 5.5%.
- Shares of Sina Corp. (SINA) soared 9.8% after the China-based online media company revealed that it received a purchase offer from New Wave MMXV Ltd., in a deal that would value Sina at approximately $ 2.68 billion. .
- Amazon.com, Inc.’s Shares (AMZN) rose 4.9% to trade at $ 3,011 per share, breaking the $ 3,000 level for the first time in its history.
- Unum Therapeutics Inc. (UMRX) rose 392% to $ 2.19 a share, leading Nasdaq earnings on Monday, after announcing the completion of the acquisition of Kiq LLC, a private biotech company, and a capital increase of nearly $ 104.4 million to through the sale of convertible shares.
How did other assets perform?
West Texas Intermediate US crude oil (CLQ20) for August delivery fell just 2 cents, or 0.05%, to settle at $ 40.63 per barrel on the New York Mercantile Exchange. In precious metals, August gold futures (GCQ20) rose $ 3.50, or 0.2%, to close at $ 1,793.50 an ounce.
The yield on 10-year Treasuries (BX: TMUBMUSD10Y) rose 1 basis point to 0.68%. Bond prices move inversely to yields.
The dollar fell 0.5% against a basket of its main rivals, based on trading in the ICE US Dollar index. (DXY)
In European equities, the Stoxx Europe 600 (XX: SXXP) index closed up 1.6%, and the London FTSE 100 (UK: UKX) rose 2.1%.
Mark DeCambre contributed reporting
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