US Stocks Rise In Early Trade On Hopes Of Swift Economic Recovery

Thursday, 18 Jun, 2020

US stocks finished higher on Monday, reversing massive losses earlier in the session, as investors digested the latest announcement from the Federal Reserve.

The theme of a strong global economic rebound "will need to be balanced against the 2nd wave COVID risks which are more hard to assess, and we would argue investors have assumed to be perhaps more modest than in reality", said MUFG's head of research, Derek Halpenny.

Rising tensions between North and South Korea spurred demand for safe havens, as did clashes between Indian and Chinese troops at a disputed border site.

That was enough to inject a tinge of caution into trading. Eastern time, after earlier pinging between a gain of 0.4% and a loss of 0.5%.

All three major US stock indexes posted their third consecutive daily gains.

Also, trial results announced Tuesday showed that dexamethasone - showed that treatment with a low dose of the steroid reduced the risk for death among COVID-19 patients on ventilator support by more than 30 percent. The Nasdaq, the best performer through the session, managed to end up 0.15%.

The numbers of new cases are rising sharply in about six US states, according to a Reuters analysis, and authorities in Beijing have ramped up mobility restrictions in their efforts to contain a new COVID-19 outbreak.

A flood of liquidity in the form of fiscal and economic stimulus, along with uneven but steady re-openings of state and local economies, sparked a remarkable rally in the stock market since its late-March trough.

The S&P 500 is about 3 per cent below its record closing high hit in February, while the tech-heavy Nasdaq was about 1 per cent below its all-time closing high on June 10. Besides cruise lines, which had the sharpest losses in the index, other travel-related companies that also need a reopening economy were also weak.

Aid from the Federal Reserve is also supporting markets, and its chairman said Tuesday that the central bank will continue to use all its tools to cushion the blow of the worst recession in decades.

In response to all this, as of 12:51am (EDT), Dow Jones Industrial Average futures traded some 464.5 points or 1.8% higher, suggesting the key United States benchmark would open higher on Tuesday, 16 June.

"The market sure seems to be favoring the good news over bad these days, and supportive measures like FOMC bond buying, COV19 vaccine hopes and optimism on a V-shaped economic rebound seem to be getting a lot more traction than rising COVID rates in South/West", said Mark Newton, a managing member at Newton Advisors, in a note. The Japanese yen strengthened 0.28% versus the greenback at 107.06 per dollar.

In commodity markets, gold was stuck at $1,717 and well within the $1,670/$1,764 range of the past few weeks.