Before The Bell - The stock market, which has made a V-shaped recovery since its March 23rd lows, was at it again yesterday morning, climbing modestly from the prior-session's close. Optimism about a reopening of the economy, even as the death toll from COVID-19 continues to rise, appears to be behind the market's comeback, which has thus far seen the Dow Jones Industrial Average jump from just over 18,000 to above 24,000. At its peak, the Dow was on the doorstep of 30,000. But that was before the world was changed by this pandemic.
As to yesterday morning, most equities edged higher in the early going after data showed that consumer inflation had softened in April, with that gauge of price change (the CPI) falling by 0.8%. As to other economic indicators, we will get a look at weekly jobless claims tomorrow morning. Thus far, more than 33 million Americans, or one-fifth of the workforce, have lost their jobs over the past seven weeks. Also, on Friday, we will get a look at April's reports on retail sales and industrial production. Neither will make for good reading.
Meanwhile, the market's advance continued through the morning, even though testimony before the Senate by several noted infectious disease experts, including Dr. Anthony Fauci, painted a bleak picture of this raging pandemic. However, as we moved into the early afternoon, the equity market headed lower, with the Dow falling by more than 100 points shortly after 1:00 PM (EDT), as concerns about the human toll of the coronavirus was hurting sentiment more than the promise of selective re-openings was helping it.
The move lower would continue into the middle of the afternoon, but did not accelerate to the downside until the final hour when the market would plummet, finally falling by 457 points in the Dow and 190 points in the NASDAQ. The S&P 500 also tumbled on fears of a resurgence in the virus. Clearly, the testimony of Dr. Fauci and two other disease experts took a major toll on the bulls yesterday afternoon. Reports of new clusters of coronavirus infections in countries such as South Korea and Germany added to the angst.
Indeed, with such concerns emerging, the temptation to lock in some impressive recent profits also played a role in yesterday's selling. Of the major sectors in the S&P 500 Index, real estate took the biggest hit yesterday, falling more than 4%. Finally, Dr. Fauci also acknowledged that a coronavirus vaccine was still a ways off, and that there was no assurance it would be successful in initially curbing this pandemic. All in all, it was a difficult day for equities, although the decline did help to take some of the froth out of an overbought market--at least in the short run.
Looking ahead to a new day now, and following yesterday's late selloff and ahead of comments from Federal Reserve Chair Jerome Powell, the equity futures seem to be suggesting that Wall Street will bounce back somewhat and open to the upside when trading resumes later this morning. – Harvey S. Katz, CFA