Stock futures hit three-month high on prospects of economic recovery

Ruben Fields
June 2, 2020

That helped financial stocks, which tend to perform better when the outlook for the economy improves, power ahead, providing the biggest boost to the S&P 500. All 50 states have embarked on some stage of reopening from forced shutdowns due to the pandemic.

At closing bell, the Dow Jones Industrial Average rose 91.91 points, or 0.4%, to 25,475.02.

The S&P index recorded 14 new 52-week highs and no new lows, while the Nasdaq recorded 52 new highs and six new lows. Bond yields were mostly higher.

The Dow opened 51.67 points higher on Friday, reversing losses seen on Friday after Donald Trump said the White House was set to begin taking action to revoke Hong Kong's favoured trade status with the United States. Investors are balancing cautious optimism about the reopening of businesses shut down because of the pandemic against worries that widespread protests in the US over police brutality could disrupt the economic recovery and widen the outbreak, The Associated Press (AP) reported. The purchases were a key component in the two countries' phase-one trade deal.

Data showed China's manufacturing activity expanded in May.

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Investors will be looking past what is expected to be a horrendous May jobs report on Friday for any incremental information about the pace of the economic reopening "which at this stage is really the undercurrent behind this big rally", he said in an interview.

Pfizer reported disappointing trial results for a breast cancer drug, keeping sentiment in check. "When you think about clearly we're beginning to take U.S". "Even with these rising protests in the US and the situation in Hong Kong at the moment, the market is pushing on and seeing room for optimism". Before May's gains, the S&P 500 surged 12.7% in April.

"The main downside risk facing stocks is a second wave of the disease", said Peter Berezin, chief global strategist at BCA Research, in a note to clients.

Berezin added, however, that he recommends a "modest overweight" portfolio allocation to stocks, noting: "Even if a vaccine does not become available later this year, increased testing should allow for a more economically palatable approach to containment strategies".

"The main focus once again appears on the longer-term prospects of the easing of lockdowns across the world, though if the violence on USA streets continues for much longer, US investors might have to cope with a lockdown of a different kind, imposed by the National Guard", said Michael Hewson, an analyst at CMC Markets.

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