After the industry data showing fewer job losses than expected, investor sentiment turns positive on account of reopening the economy after a long lockdown period. Some analyst think that the period of U.S. economic recession is over.
As states across the U.S. have started opening back investors have pinned their hopes on quick revival and getting the economic engine back on track. On Wednesday, the Dow Jones and other indices surged sharply over better-than-expected economic data which can be viewed as the first step to recovery.
The Dow Jones Industrial Average (INDEXDJX: .DJI) surged 2.1% or 500 points with a breakout above 26,000 levels. At the closing time, Dow Jones was trading at 26,269 levels. The S&P 500 (INDEXSP: .INX) gained 1.4% closing the day at 3122 levels while the Nasdaq Composite (INDEXNASDAQ: .IXIC) surged 0.8% closing at 9682 levels. While the Dow Jones and S&P 500 are still trading negative year-to-date, the Nasdaq has moved to positive gains.
It has been a good start to June 2020 so far with Dow Jones and S&P500 surging for the third consecutive day giving hope for fast recovery. Gregory Faranello, head of U.S. rates trading at AmeriVet Securities, said:
“Equities are off to a very good start in June. Looking past some clear roadblocks, risk assets continue to move forward off the back of brighter days, reopening the economy and trillions in liquidity.”
Despite the concerns of overwhelming job losses, the civil protests, and the rising COVID-19 cases, the investors have decided to look past them. But the data of the U.S. private payrolls has surprised all market enthusiasts with much fewer job losses than expected.
In May, around 2.6 million job-loses in the private sector took place against the expected figure of 8.66 million. Speaking to The Street, Mike Loewengart, managing director of investment strategy at E-Trade said:
“In the context of the current environment, the status of private sector employment is better than many anticipated. In fact, with many businesses across the country reopening – labor watchers may optimistically be thinking that the worst is behind us”.
Recovery Across Sectors
Wednesday’s recovery saw stocks across sectors pushing the market higher on strong data. This especially includes stocks like aviation and airlines which can immediately benefit from kickstarting the economic activity.
Banking stocks like Wells Fargo & Co (NYSE: WFC), JPMorgan Chase & Co (NYSE: JPM) and Bank of America Corporation (NYSE: BAC) surged by 4.5% each. Yesterday, airline stocks like American Airlines Inc (NASDAQ: AAL), United Airlines Inc (NASDAQ: UAL) and Delta Air Lines Inc (NYSE: DAL) all jumped by above 5%.
Tech companies that showed strong momentum during the lockdown period have a relatively muted response in June. Jim Paulsen, chief investment strategist at the Leuthold Group, thinks that the period of recession might be over. He added:
“Despite several issues of importance — national riots, Chinese relations, an ongoing pandemic — the stock market is primarily focused on a single thing: the restart of U.S. and global economic activities. The broader stock market (i.e., small cap stocks, cyclical sectors, international stock markets and emerging stock markets) is increasingly participating more pronouncedly in this rally suggesting the recession is ending”.
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