U.S. stocks added to their gains on Wednesday, a day after major equity benchmarks closed at their highest levels since early March, as labor-market and services data showed the pace of the economic damage wrought by the COVID-19 pandemic was slowing down.
How are benchmarks performing?
The Dow Jones Industrial Average
advanced 380 points, or 1.5%, to 26,123, its highest since early March. The S&P 500
rose 35 points, or 1.1%, to 3,115. The Nasdaq Composite Index
rose 65 points, or 0.7%, to 9,673, less than 2% away from its all-time closing high of 9817.18.
On Tuesday, the Dow rose 267.63 points, or 1.1%, to end at 25,742.65, marking its highest close since March 6, according to Dow Jones Market Data. Meanwhile, the S&P 500 index rose 25.09 points, or 0.8%, closing at 3,080.82, its loftiest finish since March 4, and the Nasdaq advanced 56.33 points, or 0.6%, to finish at 9,608.37, representing its best closing level since Feb. 20.
What’s driving the market?
Markets have climbed a virtual wall of worry to head higher over the past several sessions, shrugging of social strife and violent demonstrations in major cities, testiness between the U.S. and China and the economic carnage wrought by a viral pandemic.
Stocks were seen getting a lift as data from Automatic Data Processing showed private-sector employers shed 2.76 million jobs in May, following a decrease of 20.2 million in April. Last month’s fall was much less than the 8.66 million job losses expected from economists polled by Econoday.
”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,” wrote Mike Loewengart, managing director of investment strategy at E*TRADE.
Analysts, however, noted the more closely watched Labor Department employment report will be released Friday. The ADP data are often not a reliable guide to official data.
“We’ve seen a lot, but the economic data released in this recession have been the strangest in history,” said Chris Rupkey, chief financial economist for MUFG Securities, in a note.
In addition to labor-market data, the Institute for Supply Management said its main reading of the service sector’s health came in at 45.4 in May, above the consensus forecast of 44.7. Any reading below 50 represents a contraction in industrial activity.
Markets have largely overlooked a wave of protests across U.S. cities sparked by the death of George Floyd in Minneapolis last week — an unarmed black man who died in police custody. Protests that have at times turned violent have resulted in curfews imposed in a number of cities, including New York.
The current bout of civil unrest playing out in America has drawn comparisons to civil unrest in 1968, but BTIG analysts note that the weakened state of the economy due to the fallout from the viral outbreak makes the situation worse. “GDP growth in 1968 was 4.8%, 2020s GDP is forecast -5.8%,” they said.
Hope for success in businesses reopening has been credited with pushing stocks higher, but analysts say that an unprecedented dose of stimulus from the Federal Reserve has also provided a floor for assets considered risky.
Weekly data showed that the Fed’s balance sheet rose to $7.1 trillion as of last Wednesday, up from $7.04 trillion over the prior period. Meanwhile, the U.S. government has injected trillions of dollars more into small businesses and workers to help stem the hardship of store closures.
Which stocks are in focus?
- Zoom Video Communications Inc.
posted record sales and earnings, and expectations for more amid the COVID-19 pandemic. The videoconferencing platform’s shares were up 5.5%
- Campbell Soup Co. shares
fell 3.9% even after it reported fiscal third-quarter profit and sales that rose above expectations, and boosted its full-year outlook.
- AMC EntertainmentHoldings Inc. stock
was up 3.2% despite the cinema chain warning of a first-quarter loss as its theaters stay closed due to the coronavirus.
- Shares of Dunkin’ Brands Group Inc.
rose 3.1% after the coffee and ice cream seller reported same-store revenues had improved over the last month in its U.S. Dunkin’ and Baskin-Robbins stores.
How are other assets trading?
In Asia, Japan’s Nikkei
rose 1.3%, the China CSI 300
finished virtually unchanged and Hong Kong’s Hang Seng Index
rose 1.4%. South Korea’s Kospi index
gained 2.9% after the government proposed an extra budget worth $28.9 billion, to ease the economic impact of the coronavirus pandemic.
The greenback lost ground against its major rivals, with the ICE U.S. Dollar index
down about 0.3%.