Markets Stumble Mid-Week as Rising Infection Rates Dampen Recovery Hopes
Market Watch – June 26, 2020
It looked like it was going to be another week of steady and modest gains for N.A. markets, as investors focused on economic data, largely shrugging off rising infection rates in the U.S.
On Monday, U.S. stocks rallied after a choppy morning session, finishing higher as the Dow added 154 points, while the TSX added 43. That positive momentum continued into Tuesday as investors parsed improving economic data. U.S. private sector business activity improved for a second consecutive month in June, while new homes sales jumped nearly 17% in May, dwarfing analysts’ projections of a 3% rise. Tech stocks led the way for much of Tuesday’s session as the Nasdaq posted its 21st record close of the year. By Tuesday’s finish, the Dow was up 131, the Nasdaq climbed 75, and the TSX added 48.
Another emerging storyline on Tuesday was gold prices, which approached a new seven-and-a-half-year high. Prices are up 16% for the year, boosted by coronavirus-related economic uncertainty and expectations for more stimulus and rock- bottom interest rates.
It was quite a different picture on Wednesday, however, as the three major U.S. indexes saw their biggest daily percentage drop in almost two weeks, largely due to surging coronavirus cases in the U.S. Shares of airlines, resorts and cruise operators tumbled as the spectre of a second wave of infections soured investors. The TSX was also hit hard, dragged down by a nearly 4% decline in the energy sector.
Adding to the gloom on Wednesday was a report from the International Monetary Fund, which predicted that the global economy will contract nearly 5% in 2020, worse than its previous forecast of a 3% contraction. Also weighing on sentiment was increasing tensions between the U.S. and Europe. According to reports, the U.S. is considering levying tariffs on $3.1 billion worth of European products. That news came on the heels of Tuesday’s warning from the EU that Europe might not allow visitors from the U.S. once it reopens, citing the U.S.’s failure to contain the virus.
N.A. markets struggled for direction Thursday as the Labor Department reported another 1.5 million jobless claims last week, while coronavirus cases continued to surge in Texas, Florida, Arizona and California. Although U.S. stocks opened lower, all four N.A. indexes finished the day in positive territory.