U.S. stocks traded higher Thursday morning, reversing early losses, as financial sector stocks got a boost from what investors saw as a roll back red tape by regulators.
Investors were also digesting economic data showing a slight fall in U.S. weekly new jobless claims and a partial recovery in industrial production, but the slight gains came one day after the main indexes put in their worst one-day skid since June 11 on Wednesday, amid news of an acceleration in the daily rate of new COVID-19 cases.
How are the benchmarks performing?
The Dow Jones Industrial Average DJIA, -0.05% gained 134 points, 0.5%, to trade near 25,580, while the S&P 500 index SPX, -0.08% rose nearly 9 points or 0.3%, trading near 3,059. The Nasdaq Composite COMP, -0.02% was 25 points, 0.3%, higher, at about 9,934.
On Wednesday, the Dow shed 710.16 points, or 2.7%, ending at 25,445.94. The S&P 500 fell 80.93 points, or 2.6%, to end at 3,0501.33. The Nasdaq Composite gave up 222.20 points, or 2.2%, finishing at 9,909.17, a day after booking a fresh record closing high. All three indexes registered their worst day since June 11.
What’s driving the market?
The Federal Deposit Insurance Commission and Office of the Controller of the Currency said they are planning to loosen the restrictions imposed by the Volcker Rule, allowing banks to more easily make large investments into venture capital and similar funds. They will also be able avoid setting aside cash for derivatives trades between different affiliates of the same firm, potentially freeing up billions of dollars in capital for the industry, according to reports.
Shares of major banks, including JPMorgan JPM, +2.24% , Citigroup CITI, +0.11% and Morgan Stanley MS, +2.43% , were trading higher following the reports. Financial stocks XLF, +1.32% traded higher mid-morning on the reports.
The Federal Reserve has said that banks entered the crisis in a strong position, but analysts believe that the length of the pandemic could erode the balance sheets of some institutions as credit losses mount—a point investors will be on the lookout for.
Last week, Fed Vice Chairman Randal Quarles said the regulator asked banks to refrain from discussing results of the tests until June 29 “to provide for a more orderly dissemination of information to the public.”
Fed speakers for the day include Dallas Fed President Robert Kaplan at 9:30 a.m., Atlanta Fed President Raphael Bostic at 11 a.m., and Loretta Mester, the president of the Cleveland Fed at 12 p.m. Kaplan and Mester are voting members of the Federal Open Market Committee this year.
After the worst down day for U.S. stocks on Wednesday in about two weeks, investors were digesting a plethora of economic data Thursday morning.
In the week ended June 20, Americans filed 1.48 million new jobless claims, fewer than in the previous week and there continuing claims, a closely watched figure that tracks the overall pool of benefit recipients, declined by more than forecast to 19.5 million in the week ended June 13.
In the third and final reading of first-quarter U.S. gross domestic product, the official scorecard of the health of the U.S. economy, the government confirmed that the economy contracted at an annualized pace of 5%. And a report on orders for long-lasting, or durable, goods, showed they rose 15.8% in May.
On Wednesday stocks sold off sharply when the U.S. recorded a one-day total of 34,700 newly confirmed COVID-19 cases, the highest level since late April, the Associated Press reported, using data compiled by Johns Hopkins University.
On Wednesday, Apple Inc. said it would shut seven stories in the Houston area following a sharp rise in cases, after last week re-closing some locations in Florida, Arizona, North Carolina, and South Carolina, according to reports.
New York, New Jersey and Connecticut announced 14-day quarantines on Wednesday on visitors from states with high COVID-19 infection rates. The “travel advisory,” which impacts residents of nine states, underscores concerns about the pace of business activity resuming after lockdowns imposed to contain the spread of the pandemic.
“We’re throwing trillions of dollars at getting the economy supported and restarted,” said Chris O’Keefe, managing director at Newtown Square, Pa-based Logan Capital Management. “But that can’t solve the health issue. It always comes back to that, and the psyche out there is very much concerned about it.”
In an interview Thursday, O’Keefe told MarketWatch, “I do think the market got ahead of itself, for sure.” In particular, O’Keefe says he’s watching “some of the growthy names like Amazon AMZN, -0.01% and Facebook FB, +0.52%, ” that may be attracting some bubblelike speculation on the belief that they are pandemic-proof.
See: Here’s why stock-market distress over spiking coronavirus cases is intensifying
Which stocks are in focus?
- Darden Restaurants DRI, +4.49% the operator of Olive Garden and LongHorn Steakhouse, said Q1 sales were 70% of year-ago sales, just missing analyst expectations, but also said that 91% of its restaurants were open with some capacity as of June 22. Q1 sales of $1.27 billion just edged analyst expectations of $1.26 billion. Shares jumped 7.3% in early trade.
- Shares of Macy’s Inc. M, -3.98% were down about 1.6% after the bell after the retailer said it would cut 3,900 managerial positions and take a $180 million restructuring charge.
- Rite Aid Corp. RAD, +21.60% reported a narrower-than expected first-quarter loss ahead of the bell, and shares shot up 24%.
- Shares of Moderna Inc. MRNA, -7.32% were 3% lower after it said it had set up a manufacturing deal for a hoped-for coronavirus vaccine.
- Nike Inc. NKE, -0.69% is set to report results after the close of trade Thursday.
- Walt Disney Co. shares DIS, -1.66% may be in focus after the entertainment and theme park giant said it was delaying the reopening of its California theme parks, including Disneyland, which had been scheduled to start reopening July 17.
How are other assets performing?
West Texas Intermediate U.S. crude CLQ20, +0.26% reversed early losses to gain more than 1% to $38.50 a barrel on the New York Mercantile Exchange despite demand concerns. In precious metals, gold futures are trading lower, with the August contact GCM20, -0.26%, down $1.70 or 0.1% to $1,764.10 an ounce, two days after hitting an eight-year high.
The 10-year Treasury note yield TMUBMUSD10Y, 0.668% fell 1 basis point to 0.671%, near its lowest in two weeks, as inflows into safe-haven assets continue. Bond prices move inversely to yields.
The greenback was up 0.3% against a basket of its major rivals to 97.40, based on trading in the ICE U.S. Dollar Index DXY, +0.29%
In global equities, the Stoxx Europe 600 index SXXP, +0.71% was about 0.3% higher, at 358.43.
In Asian markets, the Japanese Nikkei NIK, -1.21% closed down 1.2%, and Hong Kong’s Hang Seng HSI, -0.50% lost 0.5%.
Related:The ‘work-from-home’ ETF is here. Get ready for some surprises.
Originally published on MarketWatch