Dow Holds Above 25,000, But US-China Spat Looms

Stock markets around the world soared yesterday and US stock futures were trading higher overnight, driven by continued optimism around economies in many regions of the world reopening. The Dow Jones Industrial Average closed above the 25,000 point mark after gaining 2.2%, back to where it was in early March, driven by financial and industrial names. 

Investors are looking to data showing the return of demand for travel, restaurant outings and other consumer categories. For example, while the number of passengers passing through transport security checkpoints in the US on May 24 was 87% lower than a year earlier, it was more than triple the figure on April 14. Investors are also anticipating more economic stimulus to come in the US and Europe, with the European Union revealing a 750 billion euro plan yesterday after months of negotiations. There are still reasons for caution, however, with all 50 US states in some form of reopening, there are now 17 where the number of coronavirus cases are rising once again.

Tensions between the US and China have reared their head again, too. On Wednesday, Secretary of State Mike Pompeo said that the US no longer considers Hong Kong to be autonomous from China, threatening its special trading status. This could impact its role as a global financial hub. 

All 12 S&P 500 sectors in the green on Wednesday

All 12 sectors of the S&P 500 were in the green yesterday, with the index closing up 1.5% overall, helped by the financial, industrial and real estate sectors. Consumer finance names and banks were among the day’s biggest winners, with the sub-sectors gaining 8.2% and 6.7% respectively. Similar to other recent positive days driven by optimistic economic sentiment, the individual names hardest hit by the prolonged shutdown (travel and retail) rose fastest — although most still lag well behind the broader market. Retailers Gap (GPS), Nordstrom (JWN) and Kohl’s (KSS) led the S&P, with all posting double digit gains, although all three remain down more than 40% year-to-date. In the Dow Jones Industrial Average, which gained 2.2%, finance giants American Express (AXP), Goldman Sachs (GS) and JPMorgan (JPM) closed the day on top, with each gaining more than 5%. 

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