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Dow Gains After Private Sector Sheds Fewer Jobs Than Feared

U.S. stocks rose in early trade Wednesday, a day after major equity benchmarks closed at their highest levels since early March, as a private-sector employment report showed the damage to the labor market last month was less severe than feared.

How are benchmarks performing?

The Dow Jones Industrial Average advanced 190 points, or 0.7%, to 25,933. The S&P 500 rose 21 points, or 0.7%, to 3,102. The Nasdaq Composite Index rose 32 points, or 0.3%, to 9,641.

On Tuesday, the Dow rose 267.63 points, or 1.1%, to end at 25,742.65, marking its highest close since March 6, according to Dow Jones Market Data. Meanwhile, the S&P 500 index rose 25.09 points, or 0.8%, closing at 3,080.82, its loftiest finish since March 4, and the Nasdaq advanced 56.33 points, or 0.6%, to finish at 9,608.37, representing its best closing level since Feb. 20.

What’s driving the market?

Markets have climbed a virtual wall of worry to head higher over the past several sessions, shrugging of social strife and violent demonstrations in major cities, testiness between the U.S. and China and the economic carnage wrought by a viral pandemic.

Stocks were seen getting a lift as data from Automatic Data Processing showed private-sector employers shed 2.76 million jobs in May, following a decrease of 20.2 million in April. Last month’s fall was much less than the 8.66 million job losses expected from economists polled by Econoday.

”In the context of the current environment, the status of private sector employment is better than many anticipated. In fact, with many businesses across the country reopening, labor watchers may optimistically be thinking that the worst is behind us,” wrote Mike Loewengart, managing director of investment strategy at E*TRADE.

Analysts, however, noted the more closely watched Labor Department employment report will be released Friday. The ADP data are often not a reliable guide to official data.

“We’ve seen a lot, but the economic data released in this recession have been the strangest in history,” said Chris Rupkey, chief financial economist for MUFG Securities, in a note.

Markets have largely overlooked a wave of protests across U.S. cities sparked by the death of George Floyd in Minneapolis last week — an unarmed black man who died in police custody. Protests that have at times turned violent have resulted in curfews imposed in a number of cities, including New York.

The current bout of civil unrest playing out in America has drawn comparisons to civil unrest in 1968, but BTIG analysts note that the weakened state of the economy due to the fallout from the viral outbreak makes the situation worse. “GDP growth in 1968 was 4.8%, 2020s GDP is forecast -5.8%,” they said.

Hope for success in businesses reopening has been credited with pushing stocks higher, but analysts say that an unprecedented dose of stimulus from the Federal Reserve has also provided a floor for assets considered risky. Weekly data showed that the Fed’s balance sheet rose to $7.1 trillion as of last Wednesday, up from $7.04 trillion over the prior period. Meanwhile, the U.S. government has injected trillions of dollars more into small businesses and workers to help stem the hardship of store closures.

In addition to labor-market data, investors will watch for a report on the services sector from the Institute for Supply Management at 10 a.m. as well as a report on factory orders at the same time.

Which stocks are in focus?
  • Zoom Video Communications Inc. posted record sales and earnings, and expectations for more amid the COVID-19 pandemic. The videoconferencing platform’s shares were up 0.1%
  • Campbell Soup Co. shares even after it reported fiscal third-quarter profit and sales that rose above expectations, and boosted its full-year outlook.
  • AMC EntertainmentHoldings Inc. stock was down 1.6% after the cinema chain warned of a first-quarter loss as its theaters stay closed due to the coronavirus.
  • Shares of Dunkin’ Brands Group Inc. rose 2.5% after the coffee and ice cream seller reported same-store revenues had improved over the last month in its U.S. Dunkin’ and Baskin-Robbins stores.
How are other assets trading?

Oil prices pulled back on Wednesday after finishing at a three-month high on Tuesday, with some doubts about a planned meeting of energy producers creating headwinds. West Texas Intermediate crude for July delivery retreated 55 cents, or 1.5%, at $36.26 a barrel.

In precious metals, August gold fell $9.60, or 0.6%, to trade at $1,724.40 an ounce on the New York Mercantile Exchange, looking to add to its 0.9% loss on Tuesday.

In global equities, the Stoxx Europe 600 index traded 1.3% higher, while the FTSE 100 index advanced 1.2%.

In Asia, Japan’s Nikkei rose 1.3%, the China CSI 300 finished virtually unchanged and Hong Kong’s Hang Seng Index rose 1.4%. South Korea’s Kospi index gained 2.9% after the government proposed an extra budget worth $28.9 billion, to ease the economic impact of the coronavirus pandemic.

The 10-year Treasury note yield rose 3 basis points to 0.71%. Bond prices move in the opposite direction of yields.

The greenback lost ground against its major rivals, with the ICE U.S. Dollar index down about 0.1% at 97.551.

Source: Marketwatch

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