Stocks Waver But Remain on Track for Weekly Gains
23 May 2020 - 5:29AM
Dow Jones News
By Anna Hirtenstein, Chong Koh Ping and Gunjan Banerji
U.S. stocks wavered but remained on track for strong gains this
week as states around the country eased coronavirus restrictions,
boosting hopes about an economic recovery.
Major indexes began the day with declines before paring some of
those losses in midday trading. The S&P 500 rose less than
0.1%. The Nasdaq Composite gained 0.3%. The Dow Jones Industrial
Average edged down about 60 points, or 0.2%.
Despite Friday's relatively muted moves, all three major indexes
are poised for weekly gains of at least 2.5%, in part driven by
optimism that coronavirus vaccines will be available later this
year. Additionally, all 50 states have relaxed some of their
coronavirus restrictions, stirring hopes about an economic rebound
as municipalities start to reopen.
"We've been aggressive buyers" of stocks, said Dev Kantesaria,
founder of Valley Forge Capital Management, which oversees about
$750 million in assets. "I believe a year from now we will be
back..almost at old levels for the economy."
Mr. Kantesaria added that he's expecting weakness in parts of
the economy, but remains broadly optimistic about a recovery.
Still, some of the confidence that drove major indexes higher
earlier in the week abated Thursday as investors parsed new data
showing that about 2.4 million Americans filed for unemployment
benefits in the week ending May 16, continuing a sharp
deterioration in the labor market. On Friday, some of the simmering
tensions between the U.S. and China escalated.
The Hang Seng Index closed down 5.6% in its worst day since July
2015 after China moved to impose new national-security laws on the
city.
China scrapped its economic growth target for 2020 in a stark
acknowledgment of the challenges facing the world's second-largest
economy, sending crude oil and metal prices sharply lower.
"Anything that knocks China's growth rate, whether it's a slower
recovery from the coronavirus or a rise in tensions with the U.S.,
will weigh on global growth expectations," said Seema Shah, chief
strategist at Principal Global Investors.
Friday's market moves may also be outsized due to lower
liquidity, as many traders in Europe took the day off to extend a
long weekend, she said.
Markets are closed Monday for Memorial Day in the U.S.
Beijing's decision to omit a formal target comes amid the
sharpest contraction in four decades precipitated by a sudden halt
in manufacturing activity because of the coronavirus pandemic. The
nation's policy makers are signaling that they won't rush to
introduce additional stimulus measures, which suggests more
economic pain for countries that have become increasingly reliant
on China as an engine of growth.
China's proposed national security law would challenge the
financial hub's autonomy and threatens to increase tensions with
the U.S. Congress condemned the move, with senators promising an
urgent push on legislation that would impose sanctions on Chinese
officials and institutions involved in undermining Hong Kong's
Western-style rule of law.
This week's developments add to what had already been escalating
tensions between the U.S. and China amid the coronavirus
pandemic.
"The market had gotten kind of used to dealing with the
coronavirus and terrible economic indicators, but potential
disruption from a trade war is proving to be too much for
sentiment," said David Madden, a market analyst at brokerage CMC
Markets.
Investors also turned to traditionally safer assets. The yield
on the 10-year U.S. Treasury note fell to 0.657%, from 0.677%
Thursday as bond prices rose.
Brent crude, the global oil benchmark, fell 2.6% to $35.13 a
barrel. Copper, a closely watched metal for its use in industrial
activity, slipped 1.7%.
"China is today the biggest importer of crude oil, so Chinese
growth is hugely important for oil demand," said Bjarne Schieldrop,
chief commodities analyst at Nordic bank SEB. "But at the same
time, demand is ticking up and supply is ticking down," as Asian
countries reopen, he said.
In Asia, most major stock benchmarks ended the day lower.
China's Shanghai Composite Index fell 1.9% while South Korea's
Kospi Index retreated 1.4%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com, Chong Koh
Ping at chong.kohping@wsj.com and Gunjan Banerji at
Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
May 22, 2020 15:14 ET (19:14 GMT)
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