Stocks Rally, Dow Gains 300 Points Despite Trump’s Latest China Threats

TOPLINE

The market opened higher on Wednesday, thanks to solid retail earnings and optimism on Wall Street about reopening the economy, with stocks shrugging off President Trump’s latest criticism of China over its handling of coronavirus.

KEY FACTS

The Dow Jones Industrial Average rose 1.2%, around 300 points, at Wednesday’s open, while the S&P 500 was up 1.3% and the Nasdaq gained 1.4%.

Sentiment was originally lifted by strong earnings from major retailers like Lowe’s and Target, which both saw same-store sales jump in the first quarter thanks to heightened demand amid the pandemic. The stocks are up by 4.9% and 0.7%, respectively.

Futures came off their highs slightly after President Trump again criticized China about its handling of coronavirus, blaming the country’s “incompetence” for “this mass Worldwide killing.”

Trump’s hardline stance on China has some experts worried that he could terminate the phase one trade deal, which he has threatened to do in the past. 

The Congressional Budget Office released a bleak outlook on economic growth and unemployment on Tuesday, predicting a 38% drop in second-quarter GDP as 26 million Americans remain without a job.

In a joint testimony before the Senate the same day, Treasury Secretary Steven Mnuchin warned of the “risk of permanent damage” if state economies remain closed for too long, while Federal Reserve Chairman Jerome Powell said that more policy action may be necessary to offset the long-lasting economic damage caused by unemployment.

Key background

The market rally on Wednesday comes amid a volatile week so far on Wall Street. On Monday, stocks had their biggest rally in six weeks, with the S&P and Dow both rising by more than 3% amid rising optimism over a coronavirus vaccine. Biotech company Moderna
MRNA
reported positive data from its early-stage coronavirus vaccine trial, causing its shares to surge 20% and leading the market higher. But stocks fell on Tuesday, after a report from STAT News raised concerns about Moderna’s trial results. The Dow lost 1.6%, almost 400 points, while the S&P 500 was down 1% and the Nasdaq 0.5%.

Crucial quote

“It seems traders should treat every trial result with caution given the volatility around both Gilead and Moderna announcements over recent weeks,” says Joshua Mahony, senior market analyst at IG. “Every specialist seems to indicate that a vaccine will take some time to develop, yet markets treat each trial announcement like we are on the cusp of a huge breakthrough that could see  everything swiftly return to normal.”

Further reading

Dow Falls 400 Points As Questions Are Raised Over Moderna’s Coronavirus Vaccine (Forbes)

60% Of America’s CFOs Don’t Expect A Return To Normal Until At Least 2021 (Forbes)

Buffett Sells More Stocks, Including Goldman Sachs, With No ‘Elephant-Sized’ Acquisition On The Horizon (Forbes)

U.S. Executives Are More Worried About The Economy Than Last Month. Here’s Why. (Forbes)

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