Tuesday June 16th

16-06-2020

Gain in stock futures accelerates before the open, Dow is now set to open 1,000 points higher

U.S. stock index futures surged on Tuesday as a record jump in retail sales — coupled with positive trial results from a potential coronavirus treatment and hopes of more stimulus — sent market sentiment soaring. Dow Jones Industrial Average futures rallied more than 900 points, or 3.5% and implied an opening gain of about 1,000 points. S&P 500 and Nasdaq-100 futures were both higher by more than 2% as well. The U.S. government reported a record 17.7% increase in retail sales for May. Economists polled by Dow Jones expected a gain of 7.7%. President Donald Trump touted the strong data, adding it “looks like a BIG DAY FOR THE STOCK MARKET, AND JOBS!” Meanwhile, multiple reports said dexamethasone — a widely available drug — can help critically ill cornavirus patients. Shares of companies that would benefit from the economy reopening led the premarket gains. United, Delta and American Airlines all rose at least 6.8%. Norwegian Cruise Line, Carnival and Royal Caribbean jumped more than 8% each. MGM Resorts, Kohl’s and Simon Property advanced 7.5%, 6% and 6.7%, respectively. Sentiment was also lifted after Bloomberg News reported, citing people familiar with the plan, the Trump administration is drawing up a $1 trillion infrastructure proposal. The report said a preliminary version being prepared would set aside the majority of the money for traditional infrastructure projects such as roads and bridges, though funds would also be reserved for 5G wireless infrastructure and rural broadband. The moves early Tuesday followed a striking rebound in U.S. equity markets a day earlier. The Dow Jones Industrial Average closed 157.62 points higher on Monday after the blue-chip index fell more than 760 points earlier in the session. The S&P 500 gained 0.8% while the Nasdaq Composite advanced 1.4%. The S&P 500 and Nasdaq had fallen as much as 2.5% and 1.9%, respectively, before erasing those losses. Traders pointed to an announcement from the Federal Reserve during Monday’s session for an abrupt move higher. The central bank said it would buy individual corporate bonds and signaled a broader approach to corporate bond buying that had remained a matter of speculation until Monday afternoon. The Fed indicated earlier in the spring that it would buy bonds on the primary market, but Monday’s announcement expanded its operations into the secondary market. All told, the Fed’s mid-June announcement represented yet another step by the Fed to backstop the financial markets and reassure investors that it will continue to support credit markets during the coronavirus. The central bank’s announcement on Monday came less than one day before investors and politicians hear from Fed Chairman Jerome Powell. The Fed leader is set to speak before Congress on Tuesday and Wednesday in his semi-annual economic testimony with his appearance before the Senate coming first. Shares in Asia jumped on Tuesday as investors reacted to recent announcements by central banks. The Nikkei 225 in Japan surged 4.88% to close at 22,582.21 while the Topix index advanced 4.09% to finish its trading day at 1,593.45. Over in South Korea, the Kospi soared 5.28% to close at 2,138.05. Hong Kong’s Hang Seng index gained 2.39% to close at 24,344.09. Mainland Chinese stocks were higher on the day, with the Shanghai composite up 1.44% to around 2,931.75 while the Shenzhen component added 1.847% to approximately 11,398.97. Oil prices rose on Tuesday, with Brent crude rising above $40 a barrel, as the IEA increased its oil demand forecast for 2020 and as record supply cuts supported. Brent crude rose 83 cents, or 2.1%, to trade at $40.54 per barrel. West Texas Intermediate crude gained 72 cents, or 1.9%, to trade at $37.84 per barrel. Gold edged higher on Tuesday supported by an easing dollar as well as the U.S. Federal Reserve’s announcement of details of a plan to start buying corporate bonds to revive the country’s economy. Spot gold rose 0.2% to $1,727.33 per ounce, after falling more than 1% before the Fed announcement on Monday. U.S. gold futures gained 0.6% to $1,737.50.