Before The Bell - The major stock market averages began the week on an up note, with the tech-laden NASDAQ the big winner. That was a reversal of a trend that started to develop last week, when technology stocks fell out of favor. Overall, the tech sector has been the clear leader in 2020.
At Monday’s close, the Dow Jones Industrials had gained a slim nine points, but the S&P 500 added 27 points and the NASDAQ jumped 264 points. The Russell 2000 small cap index dipped five points, though.
Notably, the S&P 500 closed higher than at the beginning of the year, underscoring the strong recovery from the bear market for stocks in February and March.
Among sectors, shares of consumer discretionary companies joined tech stocks as the best performers on the day. Lagging groups included industrials, energy, and utilities.
Renewed optimism on a few fronts lifted sentiment during the session. First, promising results for a coronavirus vaccine helped investors look forward to a time when mass sickness would be a thing of the past.
Hopes for another stimulus package from Washington are also in play. Granted, the two sides of the aisle are far apart on the amount that might be forthcoming, and there is room for disappointment. But the need to help the large numbers of unemployed is there.
Moreover, earnings have come in better than expected in some cases. It is still early in the reporting season, of course, with many more companies set to report in the next couple of weeks. Corporate profits will probably be at their weakest level in the June quarter, given the shutdown of activity across the economy. But earnings, like some of the recent business data points, are showing a measure of resilience.
In merger news, oil giant Chevron (CVX) announced plans to buy driller Noble Energy (NBL) for $13 billion, including debt. Chevron dropped out of a bidding war for Anadarko Petroleum last year, which proved fortunate given the steep slide in oil prices since. Further consolidation in the energy sector seems likely in view of the hard times at hand for companies in that space.
Today’s market action could be helped early on by word that European leaders have agreed on a $2 trillion spending plan to support the region’s recovery.
Developments on earnings, the potential for a COVID-19 vaccine, and the possibilities for stimulus out of Washington will also be closely watched. - Robert Mitkowski