Major U.S. stock benchmarks roared higher Wednesday, despite the battered state of the American economy and rising tensions between Beijing and Washington as investors focused on efforts to reopen more states for business.
How did major indexes fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.22% advanced 553.16 points, or 2.2%, to finish at 25,548.27, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.54% rose 44.36 points, or 1.5%, ending at 3,036.13. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.40% gained 72.14 points, or 0.8%, to close at 9,412.36, staging its biggest intraday percentage comeback since Feb. 28, according to Dow Jones Market Data.
On Tuesday, the Dow jumped 529.95 points, or 2.2%, to finish at 24,995.11, while the S&P advanced 36.32 points, or 1.2%, to end at 2,991.77, after briefly breaching the 3,000 level for the first time since March 5. The Nasdaq Composite finished at 9,340.22, up 15.63 points, or 0.2%.
What drove the stock market?
U.S.-China tensions flared up and fresh economic data showed how badly American businesses have been thrown off course by the coronavirus pandemic, but major stock indexes still marched higher.
“I think that’s a reflection that investors are encouraged by news on COVID-19 vaccinations or therapeutics,” Brian Nick, chief investment strategist at Nuveen, told MarketWatch. “That’s being coupled with some recent indications that April might have been the bottom for global economic activity, meaning that the data is bad, but not as bad as April’s data.”
The Federal Reserve reported Wednesday that economic activity through May 18 fell sharply in most of its 12 districts, amid mass unemployment and challenges in bringing employees back to work during the pandemic, as workers feared for their health, faced limited access to child care and received “generous unemployment benefits,” according to the central bank’s latest “Beige Book” report.
Meanwhile, New York Federal Reserve Bank President John Williams said the central bank was thinking hard about the possibility of targeting bond yields to keep U.S. borrowing costs low. St. Louis Fed President James Bullard also said policy makers should consider incentives to get workers back to their jobs, rather than expanding unemployment pay, as the recovery takes hold.
In other news, U.S. Secretary of State Mike Pompeo on Wednesday officially determined that Hong Kong is no longer autonomous from China, a move that could revoke the city’s two decades of U.S. economic privileges and fray economic ties between the two superpowers.
President Donald Trump said Tuesday he plans to make an announcement by the end of the week regarding China’s efforts to impose new security laws that would undercut Hong Kong’s autonomy. And China’s Foreign Ministry said on Wednesday it would strike back at the U.S. if it took any action over the security laws.
Lawmakers in Washington also are pushing ahead with legislation that would require all companies listed on U.S. stock exchanges to submit to audits reviewable by the U.S. Public Company Accounting Oversight Board — a move that could force a number of Chinese companies to delist.
Fears about being denied access to American stock exchanges, and their deep wells of funding, may encourage more Chinese companies to consider Hong Kong as an alternative to New York for new listings, despite the geopolitical risks around the financial hub. Online gaming company NetEase Inc. /zigman2/quotes/201683625/composite NTES +6.98% and e-commerce retailer JD.com Inc. /zigman2/quotes/205122565/composite JD +2.56% were pushing forward with plans to sell shares in Hong Kong, the Wall Street Journal reported.