Tuesday May 5th

5-05-2020

Stocks set for big gains as oil heads for 5-day winning streak, Dow futures up 300 points

U.S. stock index futures rose in early trading Tuesday as investors bet the U.S. economy could start to reopen again. Oil prices increased for a fifth straight day. Futures on the Dow Jones Industrial Average added 305 points, or 1.3%, and implied an opening gain of more than 200 points. S&P 500 futures rose 1.3%. Nasdaq-100 futures climbed 1.4%. Investors weighed fears of a second wave of coronavirus cases against efforts to reopen businesses and loosen restrictions. California Gov. Gavin Newsom said Monday some of the state’s retailers will be allowed to offer curb-side pickup starting Friday. Meanwhile, New York Gov. Andrew Cuomo said that the daily number of hospitalizations and new deaths are declining, suggesting the state is on “the other side of the mountain.” He added, however, that officials are not seeing as steep of a decline as they had hoped. Oil prices climbed 10% in early trading on hope the economy has bottomed. It was the fifth-straight day of gains for crude, a market that has been in turmoil with prices turning negative at one point last month. Crude is up 19% so far in May. Energy stocks like Marathon Petroleum were the biggest gainers in premarket trading Tuesday. West Texas Intermediate, the U.S. benchmark, jumped 13%, or $2.66, to trade at $23.05 per barrel. The contract gained 3.08% on Monday — closing above $20 for the first time since mid-April — and is on pace for its fifth-straight day of gains for the first time since February. International benchmark Brent crude traded 7.8% higher at $29.32 per barrel, and is also pacing for its fifth-consecutive positive session. Shares of companies that would benefit from a reopening of the economy, such as Starbucks, MGM and Ford, also gained in premarket trading. The overnight moves followed Monday’s modest gains on Wall Street. Strength in the biggest U.S. technology companies including Microsoft, Apple, Amazon, and Netflix lifted the broad market out of negative territory. The S&P 500 closed the session 0.4% higher, while the Nasdaq jumped 1.2%. Those tech shares were higher again in early trading Tuesday. “Megacaps mask underlying rally fragility,” Ken Johnson, investment strategy analyst at Wells Fargo, said in a note on Monday. “This concentration raises concerns about the rally’s long-term health and durability as it suggests that ample liquidity, rather than broadly improving fundamentals, may be fueling it.” On Monday, airline stocks suffered a big sell-off with Delta, United, American Airlines all dropping more than 5%. The decline came after Warren Buffett’s said over the weekend that his Berkshire Hathaway dumped the entirety of its stakes in the sector due to the fallout from the pandemic. Airline shares were bouncing a bit in early trading Tuesday. Tensions between China and the U.S. appeared to have flared up again. Secretary of State Mike Pompeo on Sunday said there was “a significant amount of evidence” of the coronavirus originating in a Wuhan lab. President Donald Trump previously said he was considering imposing tariffs on China for its handling of the outbreak. Stocks in Asia Pacific rose on Tuesday, with major markets regionally closed for holidays. Hong Kong’s Hang Seng index rose 1.08% to end its trading day at 23,868.66 after closing more than 4% lower on Monday. Markets in China, Japan and South Korea were closed on Tuesday for holidays. Gold prices slipped on Tuesday as the U.S. dollar strengthened and risk appetite among investors improved with moves by major economies to ease lockdowns related to the coronavirus crisis. Spot gold was down 0.3% at $1,696.56 per ounce. U.S. gold futures fell 0.5% to $1,705.20 per ounce.