Stocks Are Flying as Retail Sales Surge and the Fed Provides a Boost

Stocks Are Flying as Retail Sales Surge and the Fed Provides a Boost
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Stocks jumped on Tuesday, lifted by a combination of more central bank support around the world, the prospect of greater fiscal stimulus in the U.S., and data pointing to a faster-than-expected economic recovery.

The Dow Jones Industrial Average was up 763 points, or 3%, and the S&P 500 rose 2.7%. The Nasdaq Composite gained 2.3% and the Russell 2000 added 3%.

Overseas markets were also higher. The Stoxx Europe 600 index rose 3.2%, with Germany’s DAX up 3.6%, France’s CAC 40 up 3.2%, and the U.K.’s FTSE 100 up 3.3%. In Asia, Japan’s Nikkei 225 closed up 4.9%, China’s Shanghai Composite added 1.4%, Hong Kong’s Hang Seng rose 2.4%, and South Korea’s KOSPI Composite jumped 5.3% after a 4.8% loss on Monday.

U.S. stocks reversed earlier losses to close higher on Monday, after the Federal Reserve said it will begin buying a broad and diversified portfolio of corporate bonds, extending a program that had been limited to purchasing bond exchange-traded funds. Separately on Tuesday, the Bank of Japan extended its corporate lending package to about $1 trillion.

Investors got more good news on Tuesday morning: U.S. retail sales increased 17.7% in May, a record rebound from levels badly hit by coronavirus-related lockdowns and job losses. Economists had expected an increase of about 8.5%.

Stocks got an additional lift from hope that more fiscal stimulus is coming in the U.S. The Trump administration is considering proposing a $1 trillion infrastructure plan before current funding expires at the end of September, according to a report from Bloomberg News.

“The Federal Reserve’s announcement that it will start purchasing a wide range of corporate bonds and expand its Main Street lending scheme, along with rumblings about a $1 trillion U.S. infrastructure plan, are helping risk assets and weighing on the dollar,” said strategists at ING.

The U.S. Dollar Index (DXY)—which measures the greenback against a basket of other currencies—was about flat, after being down 0.3% earlier on Tuesday. The price of gold ticked up 0.2%, to $1,730.40 an ounce. The yield on the 10-year U.S. Treasury note rose 6 basis points, or hundredths of a percentage point, to 0.766%, as the price of the securities fell.

Oil prices, like stocks, rose again after closing with gains on Monday. Futures on West Texas Intermediate crude, the market benchmark in the U.S., were up 4.3% to $38.72 a barrel.

That’s helping energy producers’ shares. Occidental Petroleum (ticker: OXY) stock, for instance, was up 7.9%. Halliburton (HAL) shares rose 6.1% and stock in energy giant Exxon Mobil (XOM) gained 3.8%.

Travel stocks—hit hard by the pandemic—rallied after some ugly days last week. American Airlines (AAL) shares were up 7.8%, a move that leaves the shares down about 38% year to date. Cruise operator Carnival (CCL) shares gained 8.7%, but the stock remains down about 58% year to date. And Wynn Resorts (WYNN) stock rallied 4.7%, leaving shares down about 31% year to date.

Source: Barron’s

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