After a sharp Monday rally seemingly built on optimism that the impact of the global pandemic may have reached its zenith in Europe — and indeed that the United States might see a lower infection and mortality peak than some anticipated — shares once again rose this morning.
Here’s how the day looks a few minutes into the start of trading today, on this holiday-shortened week:
- Dow Jones Industrial Average: rose 886.67 at the open, or 3.91%, to 23,566.66
- S&P 500: climbed to 85.46, or 3.21%, to 2,749.14
- Nasdaq Composite: scaled 207.20, or 2.62%, to 8,120.44
Shares of SaaS and cloud companies, as measured by the Bessemer cloud index, were up over a point to start the day as well.
While the value of equities remain depressed from recent highs, yesterday’s close and today’s open have scrubbed quite a lot of red ink from the domestic market. However, volatility has been the only certainty for stock markets in recent weeks, so a few days’ trading should not be read as a longterm directional shift. Tomorrow could bring a selloff if the news turns.
Investors are hoping for a quick containment of COVID-19 and a rapid return to work, boosted by massive Federal stimulus and aid. It isn’t clear how realistic that scenario is, given rising unemployment and many states pursuing more weeks of shutdowns, and months of social distancing. How to value an economy that will either return to form slowly, or a bit more quickly than slowly, is hard. But, traders appear more sunny than not as they bid for shares today.
Earnings are next. Q1 2020 results are likely going to matter less than forecasts, so how companies talk about the future that investors are currently betting on and against will set the tone moving forward. Today, sitting between the start of the quarter, new unemployment claims data, and the real onset of earnings means that we’re in something of an information vacuum. And into such a lack of substance all sorts of optimism can blow.
Still, better positive thinking than negative, perhaps.