Wednesday May 20th


Dow futures bounce more than 200 points as volatile week continues, Lowe’s shares jump

U.S. stock index futures pointed to a solid opening for the market on Wednesday morning. Dow futures were up by 249 points. On Tuesday the market was down 1%, with a bad close. Here are the three big stories that are moving the market this morning: Strong results amid a lockdown from Lowe’s helped market sentiment. The home improvement retailer reported a same-store sales increase for the first quarter of 11.2%. The shares jumped 7% in premarket trading. In another sign of economic activity amid the pandemic, Target said a surge in digital sales fueled a 10.8% increase in same-store sales last quarter. The shares, which are up 13% in the last one month, fell slightly in premarket trading. Investors continue to watch how the reopening of states is going and so far there doesn’t appear to be major spikes in the virus. Oil continued to trade higher on Wednesday as traders bet on more driving activity. Dow futures are higher by 1%.  The futures contracts for the S&P 500 climbed 1.1%. Nasdaq-100 futures added 1%. Fueling the recent volatility is uncertainty around a possible coronavirus treatment and vaccine, and how state and local economies will fare as they prepare to re-open. On Tuesday, stocks traded most of the day around the flatline until a report raised concerns about previously publicized trial results for Moderna’s potential coronavirus vaccine. Banks and retailers weighed down the major averages. The Dow Jones Industrial Average lost 390 points. The S&P 500 also registered a loss, dropping 1.05%. Banks, retailers and airlines were bouncing higher again in premarket trading Wednesday. The Nasdaq Composite was the relative outperformer, registering a loss of 0.5%. The tech-heavy index is only 6% from its all-time record high thanks to the recent strength in the so-called FANG stocks. “Underlying performance was odd,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “We had the traditional give-backs from energy and financials. But all of the defensive sectors — utilities, consumer staples, real estate and health care — declined by 1.2% to 1.85%.  Finally, Tech and Comms had another great day in a down market reinforcing their recent character of being a defensive stock market play.” Federal Reserve chairman Jerome Powell and Treasury Secretary Steven Mnuchin testified to the Senate Banking Committee on Tuesday. Treasury Secretary Steven Mnuchin said Tuesday the Treasury and the Federal Reserve are “fully prepared to take losses” on the remaining capital from the coronavirus bailouts. Mnuchin said before the Senate Banking Committee he is prepared to distribute the entire $500 billion appropriated to help struggling businesses impacted by the coronavirus pandemic. Powell also reiterated the central bank’s commitment to programs aimed at keeping markets functioning and getting money to those who need it during the coronavirus crisis. Tuesday’s weakness comes off a stellar session for stocks on Monday where the Dow gained more than 900 points on hopes of a possible Covid-19 drug and economic recovery from reopenings.  The Dow and S&P 500 both enjoy their biggest one-day gains since April 6. “The overall stock market gave back only a small part of its monster gain from [Monday] which really was encouraging being bolstered most of the day by the prospect of a period ahead of ‘better news,’ added Paulsen. “With re-openings now the vogue about the country, it seems almost assured that fundamental economic and earnings reports are headed for a period of improvement. Coupled with a virus headed into its weak summer season and vaccine trials in full go, perhaps the stock market could be supported by something other than liquidity injections and fiscal juice.” The Dow is down slightly more than 15% and the S&P 500 is about 9.5% in 2020. The Nasdaq is still hanging on to its positive 2.4% gain for the year. Data compiled by Johns Hopkins University shows more than 4.9 million cases have been confirmed worldwide, with over 1.5 million of those infections in the U.S. alone. The Federal Reserve is set to release its meeting minutes at 2 pm ET. Stocks in Asia Pacific were mixed on Wednesday as China’s benchmark lending rate was left unchanged. In Japan, the Nikkei 225 rose 0.79% to close at 20,595.15 while the Topix index gained 0.58% to end its trading day at 1,494.69. South Korea’s Kospi ended its trading day 0.46% higher at 1,989.64. Mainland Chinese stocks edged lower on the day, with the Shanghai composite 0.51% lower at around 2,883.74 and the Shenzhen component down 0.94% to 10,948.48. Hong Kong’s Hang Seng index dipped 0.1%, as of its final hour of trading. Oil prices rose on Wednesday amid signs of improving demand and a drawdown in U.S. crude inventories but worries over the economic fallout from the coronavirus pandemic capped gains. Brent crude futures for July delivery were up 53 cents, or 1.5%, at $35.17 per barrel. West Texas Intermediate crude futures for July were up 25 cents, or 0.8%, at $32.22 a barrel. The July contract closed on Tuesday at $31.96, up 1%. The June contract expired on Tuesday at $32.50 a barrel, up 2.1%, as the WTI futures market avoided the chaos of last month’s May expiry, when prices sank below zero. Gold prices gained on Wednesday as bleak data from major economies reflected the fallout from the coronavirus crisis, while the initial euphoria over a potential Covid-19 vaccine fizzled and gave way to safe-haven demand. Spot gold was up 0.2% to $1,747.19 per ounce, as of 0256 GMT. U.S. gold futures rose 0.4% to $1,753.30.