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The Dow finished solidly lower Monday, and the broader market ended mixed for the major U.S. stock benchmarks, as investors mulled hurdles to restarting the economy.
How did major indexes fare?
The Dow Jones Industrial Average DJIA, -0.44% shed 109.33 points, or 0.5%, to end at 24,221.99. The S&P 500 index SPX, +0.01% gained less than a point to close at 2,930.19. The Nasdaq Composite COMP, +0.77% advanced 71.02 points, or 0.8%, to finish at 9,192.34.
Stocks posted back-to-back gains Thursday and Friday that left the Dow up 2.6% for the week at 24,331.32, while the S&P 500 saw weekly rise of 3.5% to 2,929.80. The Nasdaq Composite jumped 6% last week to 9,121.32.
Equities have bounced back strongly after the S&P 500 dropped by roughly a third from a February record high through March 23. Monday’s close left the Dow 18% below its all-time finish, while the S&P 500 is 13.5% below its record close and the Nasdaq was 6.4% away from its record finish.
What drove the market?
The S&P 500 and Nasdaq booked three consecutive sessions of gains Monday, while the Dow snapped a two-day win streak, as investors braced for a bumpy road to reopening the U.S. economy amid the pandemic, which in April claimed more than 20 million jobs and pushed the unemployment rate to 14.7%.
“In the near-term, are we set up for some disappointment? Sure, especially as we struggle with how to reopen parts of the economy again,” said Brian Levitt, global market strategist for Invesco, in an interview with MarketWatch.
Hopes that growth in the U.S. will rebound swiftly have been fueled by a slowdown in the rate of COVID-19 infections and efforts toward easing coronavirus-related social restrictions in parts of the country. Although there are some concerns that stock gains have been led by big-tech companies that benefit from stay-at-home orders, rather than sectors like financial stocks that typically lead in a recovery.
The Tell:Why the stock market is signaling an ‘abnormal’ economic recovery, not a V-shaped rebound
Randal Quarles, the Federal Reserve’s vice chairman for banking supervision, said the central bank will use all of its financial firepower to protect the U.S. banking system from the coronavirus crisis, while underscoring that banking organizations aren’t currently a source of strain, even though families and businesses struggle to pay their bills.
The continued rise in infections in some states and cities also could cast doubt on the recovery under foot. In addition, a hasty reopening that leads to second wave of infections, is another scenario unnerving investors.
See: Scientists expect an acceleration of coronavirus cases as states reopen
Another wild card is whether policy makers will continue to attempt to easy economic fallout from the pandemic.
BlackRock Investment Institute expects growth to be lower “as long as authorities deliver an overwhelming fiscal and monetary policy response to bridge businesses and households through the shock,” wrote Jean Boivin, head of the investment institute, and his team.
“The main risk to our view: The decisive policy response is not delivered in a successful and timely fashion, causing lasting damage to the economy,” BlackRock said.
Bullish investors point to a ramp up in federal spending aimed at cushioning the economy as a catalyst for a recovery. Even more so, investors have argued that efforts by the Federal Reserve to backstop lending and ensure market functioning have fueled the rebound in U.S. stocks and parts of the debt markets.
Treasury Secretary Steven Mnuchin said it may take a couple of weeks before new spending bills were announced. But he also said the administration was unfazed by spending $3 trillion to help shore up the economy, in an interview with CNBC on Monday.
“One of the reasons I do feel comfortable with us spending all this money is because interest rates are very low. And we’re taking advantage of long-term rates,” he told the business network.
Despite the stimulus measures deployed, skeptics contend that the stock-market’s surge from recent lows points to investors pricing in a best-case scenario.
What’s more, investors face continuing uncertainty around bipartisan support for additional fiscal relief, which likely means stocks need to take a breather, Mizuho’s U.S. chief economist Steven Ricchiuto, wrote in an afternoon note Monday.
“A sideways trading range centered around the 2880 level [for the S&P 500 index] would be a healthy development, while a continued rally would run the risk of the market getting to into major overbought position,” he warned.
Read:A ‘much more severe’ selloff looms in the stock market, strategist warns
Earnings season, meanwhile, is entering its final stretch. The pandemic has taken a toll, with aggregate earnings on track to fall about 13.6% from a year ago, the worst performance since the third quarter of 2009, according to John Butters, FactSet’s senior earnings analyst. That compares with expectations for 4.5% growth at the start of the first quarter.
Earnings Watch:Take a breath as earnings slow, but you may want to avoid the numbers to stay calm
What companies were in focus?
- Pfizer Inc. PFE, +2.36%, Merck &Co. Inc. MRK, +1.97% AAPL, +1.57% andApple Inc.shares were the biggest gainers in the Dow on Monday, as health care stocks led the S&P 500 and Nasdaq higher.
- Shares of Tesla Inc. TSLA, -0.99% lost 1% after founder Elon Musk on Saturday tweeted he would move the Silicon Valley car maker’s headquarters and operations out of California as the company’s main car-making factory remains closed due to the pandemic. Musk also followed through on a threat to sue Alameda County, where its Fremont plant is located.
- Shares of Coty Inc. COTY, -8.07% tumbled 8.1%, after the beauty company announced that KKR & Co. KKR, -0.97% had made a $750 million equity investment, while also reporting a surprise fiscal third-quarter loss and revenue that fell more than forecast.
- AMC Entertainment Holding Inc. AMC, +29.75% shares soared 29.4% after the Daily Mail reported that Amazon.com Inc. AMZN, +1.23% had showed interest in acquiring the movie-theater chain.
- Chesapeake Energy Corp. CHK, -12.24% shares fell 12%. 2 Monday after it reinstated “going concern” warning.
- Mylan N.V.’s stock MYL, -3.52% lost 3.5% after the pharmaceutical company’s revenues came in a shade lower than Wall Street expectations.
- Shares of NBC parent company Comcast CMCSA, -1.02% fell 1% after President Trump tweeted that “Meet the Press” host Chuck Todd should be fired over the editing of an interview clip with Attorney General William Barr.
- Nordstrom Inc. JWN, -5.04% and Kohl’s Corp. KSS, -3.62% shares ended lower Monday, after the pair of departments stores were the two remaining department-store chains left in the S&P 500 index, following the near or recent bankruptcy filings of J.C. Penney Company Inc. JCP, -9.11%, Neiman Marcus and Macy’s Inc. M, -1.86%, according to Dow Jones Market Data.
- Shares of Marriott International Inc. MAR, -5.57% fell 5.6% Monday, after the hotel operator missed first-quarter profit expectations, but Chief Executive Arne Sorensen highlighted a “glimmer of good news” by saying business appears to have bottomed.
How did other markets trade?
Gold for June delivery GCM20, -0.75% fell $15.90, or 0.9%, to settle at $1,698, on the New York Mercantile Exchange. Crude futures for June CLM20, -0.93% ended lower, with prices down 60 cents, or 2.4%, to end at $24.14 a barrel, amid ongoing supply concerns, even after Saudi Arabia announced an additional production cut on Monday.
As for the bond-market, the 10-year Treasury note yield TMUBMUSD10Y, 0.714% rose 4.5 basis points to 0.724%. Bond prices move in the opposite direction of yields.
In currencies, the ICE U.S. dollar index DXY, +0.44% rose 0.4%, while the MarketWatch petrocurrency index DXY, +0.44% gained 0.7%.
The Stoxx Europe 600 index SXXP, -0.39% ended 0.4% lower. Asian shares rallied, with Hong Kong’s Hang Seng Index HSI, +1.53% and Japan’s benchmark Topix 180460, +1.53% both booking a 1.5% gain on Monday.
William Watts contributed reporting
