U.S. stocks ended up sharply higher, led by shares of financial companies and technology shares as Wall Street followed Chinese equity markets higher
U.S. stocks finished sharply higher Monday, with the Nasdaq scoring a record close, as Wall Street followed surging Chinese equity benchmarks to their best levels in at least two years.
Monday’s upbeat market action contrasted with a further spike in U.S. coronavirus cases and a resurgence of business restrictions by state and local authorities struggling to contain the viral outbreak.
The Dow Jones Industrial Average DJIA, +1.78% gained 459.67 points, or 1.8%, to end at 26,287.03. The S&P 500 SPX, +1.58% climbed 49.71 points, or 1.6%, ending at 3,179.72 and booking five straight sessions of gains, its longest streak since Dec. 17, according to Dow Jones Market Data. The Nasdaq Composite Index COMP, +2.21% surged 226.02 points, or 2.2%, to 10,433.65, scoring a fresh closing record.
The Dow finished last week’s holiday-shortened period up 3.3%, the S&P 500 put in a weekly gain of 4%, while the Nasdaq returned 4.6%, after closing at a record on Thursday.
The U.S. market was closed on Friday in observance of the Independence Day holiday.
U.S. stocks ended up sharply Monday, led by shares of financial companies and record-setting technology shares as Wall Street followed Chinese equity markets higher.
Goldman Sachs Group Inc. GS, +5.04% share advanced 5.1%, leading the blue-chip Dow higher, along with Boeing Co. BA, +3.92% and Walgreens Boots Alliance Inc. WBA, +2.81%.
But Monday’s gains also came with growing doubts about the ability of the U.S. to contain the viral outbreak and its economic fallout, after COVID-19 cases climbed across the U.S. over the Fourth of July weekend.
This is potentially setting the U.S. on a very different activity restart path than most Western countries and much of Asia, warned a BlackRock Investment Institute team led by Mike Pyle, global chief investment strategist, in a note Monday.
The BlackRock team lauded the coordinated U.S. fiscal and monetary response in March, but they also warned that the “resurgence of the virus is taking place just as Congress and the White House face a critical decision over whether to extend a number of crisis measures, including additional federal unemployment benefits set to expire at the end of July.”
Kristina Hooper, Invesco’s chief global market strategist, also warned that recent improvements on the U.S. jobless front and surprisingly better economic data could be derailed in the coming months if policy makers become complacent in their response to rising COVID-19 infections.
In my view, more fiscal stimulus is clearly needed as so much of the stimulus already enacted is very temporary in nature, Hooper wrote in a client note. In addition, we are seeing a growing number of companies announce layoffs and file for bankruptcies while others are voluntarily re-closing stores.
Thousands of retail shops and bars and restaurants are closing, or soon will be, after the coronavirus pandemic stopped the flow of traffic and crashed sales and revenues and tipped many businesses into financial bankruptcy and, yet, purchasing managers say the outlook for the service sector is looking up, said Chris Rupkey, chief financial economist for MUFG.
Market bulls have been attributing rising stocks to optimism around a sharp, or V-shaped, economic recovery in the U.S., as well as Asia, in no small part due to global fiscal and monetary stimulus that helped markets recover from the depths of their mid-March selloff.
Beyond the rise in U.S. infections, optimism reflected in equities on Monday also comes despite economists at Goldman Sachs lowering their already downbeat forecast for U.S. domestic growth in 2020 to negative 4.6%, from a previous forecast for a 4.2% drop, pointing to the reimposition of COVID-19 restrictions on business activity. For 2021, the bank is sticking to its forecast for growth to rebound 5.8%.
In Asian hours Monday, Chinese shares jumped, with the flagship Shanghai Composite SHCOMP, 1.51% finishing up 5.7%, to the highest level since 2018 and the CSI 300 Index 000300, 1.95% booking a similar return, after a front-page editorial in state-owned paper, China Securities Journal, said fostering a “healthy bull market” is important, according to a translation.
The move higher in stocks came as China continued to fend off sanctions and criticism about its decision to impose a national-security law in Hong Kong, a crackdown that has drawn the rebuke of several countries, including the U.S. and Canada.
West Texas Intermediate U.S. crude CLQ20, -1.23% for August delivery fell only 2 cents, or 0.05%, to settle at $40.63 a barrel, on the New York Mercantile Exchange. In precious metals, August gold futures GCQ20, 0.06% rose $3.50, or 0.2%, to close at $1,793.50 an ounce.
The 10-year Treasury note yield, 0.674% was up 1.3 basis points at 0.683%. Bond prices move inversely to yields.
The greenback fell 0.4% against a basket of its major rivals, based on trading in the ICE U.S. Dollar Index. DXY, 0.12%
In European equities, the Stoxx Europe 600 index SXXP, +1.58% closed up 1.6%, and London’s FTSE 100 UKX, +2.08% climbed 2.1%.