United States stocks point to coming bull market

United States stocks point to coming bull market

The Dow Jones industrial average was down 287 points, or 1%, to 27,284, and the Nasdaq composite was down 0.2%.

The S&P 500 closed at a 15-week high, bringing its rally from the March low to nearly 45%, while the Nasdaq 100 rose to a record. The S&P 500, which is about 5% below its own all-time high, also erased its year-to-date losses.

Stocks have been rising since late March, at first on relief after the Federal Reserve and Capitol Hill pledged to support the economy and more recently on hopes that the recovery may happen more quickly than forecast.

Asian stocks opened mostly higher Tuesday, extending a global rally after their US peers pushed back into the green for the year as easing lockdowns bolstered economic optimism.

"As states begin to reopen, small businesses continue to navigate the economic landscape rocked by COVID-19 and new government policies", said NFIB's Chief Economist Bill Dunkelberg.

"Recent data points like the jobs report and not-as-bad-as-feared company updates have fueled the view that the worst of the declines could be behind us", a team of RBC Capital Markets analysts told clients Monday.

The headliner, though, is likely the Federal Reserve's meeting on interest rates in the middle of the week.

In another sign of increased caution, the yield on the 10-year Treasury yield fell to 0.82% from 0.88% late Monday. The Fed has already promised unprecedented amounts of support to keep markets running smoothly, but will the recent upturn in job growth mean it will pull back at all?

Too quick a rise in yields could slow spending and the anticipated economic recovery, though. "And of course the development of a safe, effective vaccine is also an important assumption that is built into the market's historic advance and move toward euphoria".

US Stocks bull market

With much of the country enthusiastic over the economy reopening, investors have urged the stock market higher, even as the number of coronavirus cases continues to grow, comforted by massive Fed stimulus and encouraging unemployment data from last week.

The broader stock market remains below the all-time high it reached February 19.

Travel-related stocks were notable standouts as investors raised expectations for a reopening economy.

The S&P 1500 airlines index declined 8.5%, while cruise operators Carnival Corp and Norwegian Cruise Line Holdings Ltd fell between 10% and 12% after climbing on Monday. The Russell 2000 index of small-cap stocks rose 2%.

"It's hard for the retail investor, for the institutional investor as well, to understand how the market can be back to where it started (the year), given the damage that's been caused to the economy". Facebook added 3.1% and Netflix gained 2.7%.

In global markets, Japan's Nikkei 225 index jumped 1.4% after the government reported the economy contracted at a 2.2% annual rate in the January-March quarter, better than the initially estimated minus 3.4%.

Indexes in other countries were more subdued, with European markets down modestly.

Oil prices were under some modest pressure, with USA benchmark West Texas Intermediate down about half a per cent to trade just shy of US$38 per barrel.

Crude oil futures dropped 0.6% at $37.96 per barrel, Brent crude fell 1.15% at $40.33.

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