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US open: Stocks continue to rally on optimism around reopening economy

Wed 03 June 2020 15:42 | A A A

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(Sharecast News) - Wall Street stocks opened higher on Wednesday as major indices continued to rally amid growing optimism regarding the reopening of several US states.

As of 1540 BST, the Dow Jones Industrial Average was up 1.07% at 26,017.52, while the S&P 500 was 0.83% firmer at 3,106.46 and the Nasdaq Composite came out the gate 0.39% stronger at 9,646.19.

The Dow Jones opened 274.87 points higher on Wednesday, carrying on a rally seen in the previous session after market participants remained optimistic about the reopening of the US economy despite a wave of civil unrest spreading across the country.

As far as Wednesday was concerned, investors were zoned in on the latest set of private-sector employment figures from the Automatic Data Processing. The report revealed US firms shed another 2.76m jobs throughout May as a result of the ongoing Covid-19 pandemic - with losses particularly pronounced at larger business, which reported a decline of more than 1.6m.

Market participants also remained focussed on a wave of protests across the US as a result of the death of George Floyd, an unarmed African-American man, in Minneapolis last week under the knee of a white police officer.

However, with protests becoming more peaceful after several US cities, including New York City, imposed curfews on their citizens, hopes of reopening the economy have offset many other investor worries.

Donald Trump also seemed to be dialling down on his threat to deploy US troops into cities, with White House officials stating this week's response indicated that local governments would likely be able to restore order.

On the macro front, mortgage applications for the week ended 29 March fell 3.7%, a marked turnaround from the 2.7% increase seen in the prior week. According to the Mortgage Bankers Association, the drop principally stemmed from a reduction in refinancing activity.

Elsewhere, IHS Markit's services purchasing managers' index rose to 37.5 for May's final reading, a slight recovery from the all-time low of 26.7 set in April. The composite PMI improved to 37 from 27.

Still on data, new orders for US-made goods dived in April, indicating that business spending had remained depressed early on in the second quarter of 2020 due to the coronavirus pandemic.

The Commerce Department revealed that factory orders had dropped 13% for the month, while data for March was revised to show orders falling 11% instead of the 10.3% as initially reported.

Lastly, the Institute for Supply Management's non-manufacturing index rose 3.6 points to 45.4 in May as American service providers began to emerge from their Covid-19 lockdowns. Economists were expecting a reading of 44.

In corporate news, 3M revealed on Wednesday that long-time chief financial officer Nick Gangestad will be succeeded by Monish Patolawala, while Warner Music Group priced its initial public offering at $25 per share as it looked to raise up $1.92bn.

Stocks tied to the reopening of the economy, such as American, Delta and United Airlines, were all up at the bell, as were banks JPMorgan Chase, Wells Fargo and Bank of America.

On the other hand, shares in companies that have benefited from strict stay-at-home orders like Amazon, Netflix, Zoom Video and Shopify were all lower at the open.

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