Wall Street and much of the Financial District stands empty as the coronavirus keeps financial markets and businesses mostly closed on April 20, 2020 in New York City.
Spencer Platt | Getty Images
Stocks rose sharply on Tuesday as investors bet the U.S. economy could start to reopen again. Oil prices increased for a fifth straight day.
Investors weighed fears of a second wave of coronavirus cases against efforts to reopen businesses and loosen restrictions. California Gov. Gavin Newsom said Monday some of the state’s retailers will be allowed to offer curb-side pickup starting Friday.
Meanwhile, New York Gov. Andrew Cuomo said that the daily number of hospitalizations and new deaths are declining, suggesting the state is on “the other side of the mountain.” He added, however, that officials are not seeing as steep of a decline as they had hoped.
“The state openings and case counts peaking, and also ‘earnings confessions’ are all acting to reduce uncertainty,” said Tom Lee, founder and head of research at Fundstrat Global Advisors. “This is, in our view, the primary reason stocks are drifting higher and shifted into the hands of buyers.”
“The market was overwhelmed with sellers, causing the fastest crash ever. So we think risk/reward still favors buyers,” Lee added.
Shares of companies that would benefit from a reopening of the economy led the way higher. MGM Resorts traded nearly 2% higher while Starbucks and Ford Motor each rose more than 3%.
Oil prices climbed 16% on hope the economy has bottomed. It was the fifth-straight day of gains for crude, a market that has been in turmoil with prices turning negative at one point last month. Crude is up 19% so far in May.
Crude’s surge sparked a 4.6% rally in the S&P 500 energy sector. Noble Energy rose more than 9% to lead the sector higher while Apache and Occidental Petroleum both gained more than 7%.
The moves followed Monday’s modest gains on Wall Street. Strength in the biggest U.S. technology companies including Microsoft, Apple, Amazon, and Netflix lifted the broad market out of negative territory. The S&P 500 closed the session 0.4% higher, while the Nasdaq jumped 1.2%.
Those tech shares were higher again in early trading Tuesday.
“Megacaps mask underlying rally fragility,” Ken Johnson, investment strategy analyst at Wells Fargo, said in a note on Monday. “This concentration raises concerns about the rally’s long-term health and durability as it suggests that ample liquidity, rather than broadly improving fundamentals, may be fueling it.”
On Monday, airline stocks suffered a big sell-off with Delta, United, American Airlines all dropping more than 5%. The decline came after Warren Buffett’s said over the weekend that his Berkshire Hathaway dumped the entirety of its stakes in the sector due to the fallout from the pandemic.
Airline shares were bouncing a bit in early trading Tuesday.
Tensions between China and the U.S. appeared to have flared up again. Secretary of State Mike Pompeo on Sunday said there was “a significant amount of evidence” of the coronavirus originating in a Wuhan lab. President Donald Trump previously said he was considering imposing tariffs on China for its handling of the outbreak.
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