Friday June 12th

12-06-2020

Dow futures bounce by 400 points as Wall Street tries to recover from its worst day since March

U.S. stock index rebounded Friday, a day after the worst market drop since March which came on fears a resurgence in coronavirus cases. Dow Jones Industrial Average futures rose 478 points, or 2% on Friday. The move implied an opening gain of about 520 points. S&P 500 futures gained 1.6%. Nasdaq-100 futures added 1.4%. Investors on Friday went right back into the plays whose fates hinge on a successful reopening of the economy. Carnival Corp jumped 10% in premarket trading. United Airlines climbed 8%. Other premarket winners included brick-and-mortar retailers Kohl’s and Gap. Those stocks were hit big time during Thursday’s sell-off as investors feared the reopening of the economy could be delayed by a second wave of cases. The Dow, S&P 500 and Nasdaq on Thursday all recorded their biggest one-day losses since mid-March, posting losses of at least 5%. Thursday’s declines put the major averages on pace for their biggest weekly losses since March 20, when they all dropped at least 12% amid broad economic shutdowns stemming from the pandemic. Even after Friday morning’s bounce, Morgan Stanley Investment Management’s Andrew Slimmon said: “Given the magnitude of the rally, it would shock me if we had a one day sell-off and that’s it.” “The stocks that are up the most from the lows are still the risk-on, high beta, value, small-cap stocks,” Slimmon, who is a managing director and senior portfolio manager at the firm, told CNBC’s “Squawk Box Asia” Friday morning Singapore time. “They’re still the big winners and I would suspect that there’s more pain to come near-term before the market clears out kind of this excessive speculation that we’ve seen recently.” Wall Street’s fear gauge signaled more wild trading ahead. The Cboe Volatility Index on Thursday jumped to trade above 40 for the first time since May 4. The VIX remained elevated Thursday morning, above 37. Stocks had been ripping higher prior to this week, as investors cheered the prospects of the economy recovering as states and countries eases quarantine measures. “We had gone straight up more than 30% without a real sell-off, so you’re due for one, and I don’t think it’s the worst thing in the world,” said JJ Kinahan, chief market strategist at TD Ameritrade. “As more states get back, the question becomes: Are they going to ramp up fast enough to please Wall Street? What you’re seeing is it’ll be hard to do that.” Despite Thursday’s sell-off, the S&P 500 and Dow remained more than 37% above the intraday lows reached on March 23. Most of those gains have been driven by stocks that would benefit from the economy reopening, including airlines, cruise lines and retailers. “Some of these stocks may have gotten ahead of their skis,” said Kinahan. “When you see some of the airlines being priced at the levels they were before this all started when they say they’re going to do 60% of their business just doesn’t make sense.” American, Delta and United ended Thursday’s session down more than 20% each for the week while Southwest has lost 14%. Banks such as JPMorgan Chase, Citigroup, Wells Fargo and Bank of America — which have surged amid expectations of improving economic activity — are all down over 12% for the week. Consumer sentiment data along with the latest U.S. import and export numbers are scheduled for release Friday morning. Stocks in Asia Pacific dropped in Friday afternoon trade after an overnight plunge on Wall Street amid fears of a second wave resurgence of the coronavirus pandemic. South Korea’s Kospi led losses among the region’s major markets, dropping around 2% to close at 2,132.30. The Kosdaq index also declined around 1.45% to 746.06. Over in Hong Kong, the Hang Seng index dropped 1.08%. Mainland Chinese stocks also edged lower, with the Shanghai composite closing almost flat to 2,919.74 while the Shenzhen component edged up marginally to close at 11,251.71. In Japan, the Nikkei 225 shed 0.75% to 22,305.48 while the Topix index fell 1.15% to close at 1,570.68. Oil prices edged higher on Friday but were on track for their first weekly fall in seven as new U.S. coronavirus cases spiked, raising the prospect of a second wave hitting demand. Brent was up 27 cents, or 0.7%, at $38.82 a barrel, having lost more than $1 earlier in the session. West Texas Intermediate was up 12 cents, or 0.3% to $36.46 a barrel. Both contracts ended around 8% lower on Thursday. Gold rose on Friday as fears regarding the resurgence of coronavirus infections and grim economic outlook by the U.S. Federal Reserve boosted demand for bullion, leading the metal towards its biggest weekly gain since early-April. Spot gold gained 0.3% to $1,732.91 per ounce, and has jumped about 2.8% so far this week, which could be its biggest gain since the week of April 10. U.S. gold futures eased 0.1% to $1,738.60.