U.S stocks booked sharp gains Monday, erasing May losses, on optimism that the American economy might be percolating again, while the medical community works toward a potential COVID-19 vaccine.
Support was also tied to remarks by Federal Reserve Chairman Jerome Powell on Sunday night, striking a more upbeat tone on U.S. growth prospects, while reiterating that the central bank still retained tools to limit the economic downturn.
How did benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.44% surged 911.95 points, or 3.9%, to finish at 24,597.37, after briefly advancing 1,000 points. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.05% rose 90.21 points, or 3.2%, to end at 2,953.91. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.66% added 220.27 points, or 2.4%, closing at 9,234.83.
On Friday, the Dow rose 61 points, or less than 0.3%, to 23,685.42, while the S&P 500 rose 11.20 points, or 0.4%, higher to end the session at 2,863.70. The Nasdaq Composite Index closed at 9,014.56 after gaining 70.84 points, or 0.8%.
Monday’s rally pushed major indexes into positive territory for the month despite last week suffering the biggest weekly decline since March. The Dow is up 1.5% for the month, while the S&P 500 is 3.2% higher. The Nasdaq added to a monthly rise, bringing it to 6.8%.
What drove the market?
Air traffic appeared to be picking up from recent lows, states have been reopening and drugmaker Moderna announced positive , early results from its first human trial of its experimental Covid-19 vaccine.
Moderna Inc /zigman2/quotes/205619834/composite MRNA -3.63% shares soared 20% Monday after the company released “compelling” early data from a phase-one clinical trial for its experimental coronavirus vaccine, providing a jolt to markets that have been hopeful for a treatment or vaccine for the deadly illness that has stricken more than 4.7 million world-wide so far, according to data compiled by Johns Hopkins University.
“What the market does is it tries to discount ahead. People are now going to anticipate the treatment, and the bets are coming in that we seen an end coming in sooner rather than later,” said Joe Saluzzi, co-head of equity trading at Themis trading, in an interview.
The next step for Moderna is a phase-two trial, which has been approved to move forward by the Food and Drug Administration. The phase-one trial was done in partnership with the National Institute of Allergy and Infectious Diseases.
Stock-market bulls also gained confidence following remarks by the U.S. central bank chief Powell on Sunday and Monday that the Fed would continue to support the economy and financial markets through the viral outbreak.
“While lockdowns (and how to end them) continue to dominate the economic conversation, it seems to me that the stock market has largely shrugged off the damage created by the pandemic-related cessation of economic activity,” wrote Kristina Hooper, Invesco’s chief global market strategist, in emailed comments Monday. “But that’s because of the massive policy response, particularly monetary policy.”
In a Sunday interview with CBS’ “60 Minutes” program , Powell said that the road to recovery for the U.S. may take a while and consumers may lack conviction until efforts to find a vaccine for the illness derived from the novel strain of coronavirus are successful.
That said, the monetary-policy maker struck a cautiously sanguine tone about the likelihood for a rebound for an economy that has shown signs of the extreme toll taken on it by measures put in place to limit the spread of the pathogen.
“In the long run and even in the medium run, you wouldn’t want to bet against the American economy,” Powell said during the television interview. He did caution that a second wave of infections could rattle confidence further.
Powell also acknowledged that the unemployment rate could hit as high as 25%, marking levels not seen since the Great Depression. But the Fed boss said that he didn’t fear a second depression for the U.S., forecasting that an economic rebound would start to take shape in the second half of the year.