Monday July 6th

6-07-2020

The Dow is set to open 400 points higher as Wall Street builds on last week’s gains, airlines rise

U.S. stock index futures traded sharply higher early Monday as Wall Street tried to build on the momentum from last week’s solid performance and shake off a continued rise in coronavirus cases. Dow Jones Industrial Average futures rose 394 points, or 1.6%. The move implied an opening gain of more than 450 points. S&P 500 futures gained 1.5%. Nasdaq-100 futures gained 1.6%. There were a few reasons for the bullish lift to start the week: Stocks closely tied to an economic reopening gained in premarket trading Monday. Carnival Corp, Royal Caribbean and Norwegian Cruise Line all jumped more than 3%. American Airlines and Delta Air Lines also gained more than 3%. Shares of retailer Gap were higher as well. Dealmaking also boosted sentiment. Warren Buffett made his first major deal amid the market turmoil this year, with Berkshire Hathaway buying the natural gas transmission and storage assets from Dominion Energy for about $10 billion including debt. Dominion Energy added 5% in premarket trading. Uber shares gained after it said it was buying food-delivery app Postmates in an all-stock deal worth $2.65 billion. Chinese stocks soared, with the Shanghai Composite jumping more than 5%, as that country continued to open up following their coronavirus outbreak. Stocks were building on momentum to start the second half. The Dow and S&P 500 rose 3.3% and 4%, respectively, last week and the Nasdaq advanced 4.6% in that time.The market also wrapped up last week its best quarterly performance in decades. The Dow rallied more than 17% for the second quarter while the S&P 500 jumped nearly 20% in that time period. The Nasdaq posted a gain of 30.6% for the quarter. “The economy is doing a lot better than most of the economists think,” said Jeff Saut, chief investment strategist at Capital Wealth Planning, to CNBC’s “Squawk Box” on Monday. “We may stall here for a while into the fall, into September, October, November, but I think you’re going to get a rocket ship coming in the fall of this year...I think the S&P 500 is going to trade above 4,000.” Sunday’s gains we’re kept in check, however, as the number of coronavirus cases kept surging globally, raising concerns about the world economy and its recovery from the pandemic. The World Health Organization said Saturday that more than 200,000 coronavirus cases were confirmed over a 24-hour span, a record. At a regional level, the biggest spike was seen in the Americas, where nearly 130,000 new cases were confirmed. In the U.S., Florida and Texas reported daily record spikes of 11,445 and 8,258, respectively, on Saturday. Houston Mayor Sylvester Turner said the outbreak is on pace to overwhelm the city’s hospitals in two weeks. Miami Mayor Francis Suarez told ABC this weekend: “It’s clear that the growth is exponential at this point.” Data compiled by Johns Hopkins University showed that more than 45,000 new cases were confirmed across the U.S. on Saturday. “We are currently experiencing a spike in Covid-19 cases, particularly in the sunbelt states that were in the vanguard of loosening social distancing restrictions to facilitate the reopening of their economies,” said Marc Chaikin, CEO of Chaikin Analytics, in a post. “That reopening momentum has been halted by the spike in Covid-19 cases and the temptation to translate this into a bearish outlook for stocks is strong,” he added. “Fatalities have not spiked, however, but are a lagging indicator. Thus the next two weeks are critical for a number of reasons.” Stocks in Asia Pacific were higher during Monday’s trading session, with shares in mainland China leading regional gains. The Shanghai composite soared 5.71% to close at around 3,332.88 while the Shenzhen component rose 4.089% to finish its trading day at about 12,941.72. The CSI 300, which tracks the largest stocks listed on the mainland, also surged 5.67% to close at around 4,670.09. Hong Kong’s Hang Seng index also saw robust gains and rose 3.81% on the day to 26,339.16. Elsewhere in the region, the Nikkei 225 in Japan rose 1.83% to close at 22,714.44 while the Topix index added 1.6% to finish its trading day at 1,577.15. South Korea’s Kospi advanced 1.65% to close at 2,187.93. Oil prices rose on Monday, supported by tighter supplies and a string of data expected to show economic recovery across the globe and despite a spike in coronavirus cases in the United States and other countries. Brent crude was up 73 cents, or 1.7%, to $43.53 per barrel by 0808 GMT. U.S. West Texas Intermediate (WTI) crude was up 28 cents, or 0.7%, at $40.93. Gold held steady on Monday as lingering fears of a surge in coronavirus cases countered pressure from stronger equities and the market awaited U.S. services sector data expected later in the day. Spot gold was up 0.1% at $1,776.76 per ounce. U.S. gold futures fell 0.2% to $1,786.40 per ounce.