With major states in the U.S. lifting the lockdown, traders showed optimism over kickstarting the economy. So far, the market has ignored the civil unrest after riots broke out following George Floyd’s death. Analysts think that if this continues further, it can deter consumer confidence.
Although the coronavirus pandemic continues to create havoc with daily rising cases, countries are now focusing on kickstarting their economies after over a month in lockdown. After the reopening of the states in the U.S., Wall Street showed signs of optimism on Tuesday. Despite the ongoing civil unrest in the country, Wall Street stocks traders seem to be focusing on the next economic developments. The Dow Jones Industrial Average (INDEXDJX: .DJI) surged over 1% closing at 25,742 levels on Tuesday. On the other hand, the S&P 500 gained 0.8% to close at 3080 levels.
With Tuesday’s gains, the indices are roughly trading at a 40% premium from its March lows. The majority of the banking stocks outperformed on Tuesday over the optimism of economic reopening. Wells Fargo & Co (NYSE: WFC) and Bank of America Corporation (NYSE: BAC) surged around 1% while Citigroup Inc (NYSE: C) is up 2.8%.
On the other hand, clothing retailer and giant Gap Inc. (NYSE: GPS) surged around 7% on Tuesday. Jeff Kilburg, CEO of KKM Financial told CNBC:
“This is a healthy reversion as you’re seeing some of the laggards come back in line. If anything, this is going to help sustain a more bullish stance in the marketplace.”
The BigTech companies that have been the major contributors to the economic resurgence showed a muted response on Tuesday. Stocks of Apple Inc (NASDAQ: AAPL), Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), Facebook Inc (NASDAQ: FB), and Netflix Inc (NASDAQ: NFLX) gained anywhere between 0.3% to 0.5%.
But now only stocks traders on Wall Street seem to be optimistic. The Oil market and the Treasury yields also contributed to Tuesday’s market movement. Moreover, despite the ongoing cold economic war between China and the U.S., trade continued between the two nations. Reuters reported that local Chinese companies bought at least three cargoes of U.S. soybeans. This could have certainly contributed to the positive market sentiment.
U.S. Civil Unrest and Stock Market Response
Over the last weekend, major U.S. cities were trapped in riots following the death of George Floyd. This led to major civil unrest in the country. Speaking on the matter, President Trump said that he would consider using the military if states and cities fail to bring down the violent protests. On Monday, President Trump said:
“I am mobilizing all federal and local resources, civilian and military, to protect the rights of law-abiding Americans,. If a city or state refuses to take the actions necessary to defend the life and property of their residents, then I will deploy the United States military and quickly solve the problem for them.”
So far, the stock market has largely ignored this unrest. It seems that traders are more eager and focused on kickstarting the economy back. However, if violent protests continue throughout the summer, it could hurt consumer confidence. New York City has already imposed a curfew until June 7 to curb protests.
On the other hand, developments with regard to COVID-19 has also helped the stock market. Lori Calvasina, RBC’s chief U.S. equity strategist, said:
“Good news on vaccines helped stocks in May, but US-China relations & civil unrest could steal the spotlight in June. The S&P 500 remains highly news flow driven.”
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.