Dow Creeps Sideways as Trump Promises Everything to Reopen America

May 6, 2020 11:41 AM UTC
Investor sentiment hesitates as Trump flirts with winding down the coronavirus task force and going all-in on the economy.
  • The Dow Jones Industrial Average (DJIA) struggled to extend its rally during a cautious day on Wall Street on Wednesday.
  • President Trump shifts focus to the economy and a fresh round of tax cuts, proving he will do everything to keep the stock market alive.
  • The president’s approval rating has shot back to his personal high as Americans are eager to get back to work.

The stock market is struggling to extend its rally as President Trump puts his chips on the table and goes all-in on the economy. The Dow Jones Industrial Average (DJIA) nervously ventured sideways on Wednesday.

President Trump has proved he will do everything possible to keep the stock market alive going into the election campaign. He’s now on a rampage to get the U.S. economy firing again, doubling down on his plans to re-open America as soon as possible.

People aren’t going to accept [lockdowns]. They won’t accept it. And they shouldn’t accept it. We have a great country. We shouldn’t keep it closed.

Overnight he also floated a series of tax cuts designed to support the economy. In short, he’s throwing the kitchen sink at the stock market.

Dow nervously pushes sideways

The Dow Jones opened to triple-digit gains, but the rally began to wobble shortly after the opening bell rang.

By 10:03 am ET, the Dow had slid back into decline, falling 17.44 points or 0.07% to 23,865.65.

The DJIA was the worst performer among Wall Street’s three primary indices. A dismal earnings report at Disney last night may have dented investor sentiment.

The Dow cautiously moved higher on Wednesday morning before ebbing lower. | Source: Yahoo Finance

The S&P 500 and Nasdaq reported gains of 0.02% and 0.59%, respectively.

Trump shifts focus to the economy

The White House has begun flirting with winding down the coronavirus task force, led by Vice President Mike Pence, by the end of May. Instead, the Trump administration desires to focus on the economy and re-opening states. Asked why, he said:

Because we can’t keep our country closed for the next five years.

The move is controversial as it comes while the coronavirus pandemic still ravages America. New models predict that deaths could rise to 134,000 by August if lockdowns are eased now. That’s double the original estimate.

Unsurprisingly, Trump’s comments incited a severe backlash. The president backtracked on Wednesday morning, stating that the task force would “continue on indefinitely.”

Nevertheless, his instincts show the clear direction of the Trump White House: keep the economy going.

More tax cuts coming?

Investors are also buoyed by Trump’s commitment to include a wave of tax cuts in the next stimulus package.

We’re not doing anything without a payroll tax cut.

Trump is determined to push his ambitious payroll tax cut plan through Congress and “perhaps” even a capital gains tax cut. The president is also looking at ways to reward companies for investing now by allowing them to deduct costs.

In sum, it’s a gift for corporate America, if he can get it passed in Congress.

Trump’s approval rating shows America is on board

These might seem like controversial moves from the White House, but Americans are behind Trump. The president’s approval rating is back to his personal best of 49% after dipping slightly in March.

That’s significantly higher than his average of 40% through his presidency.

Trump’s approval rating jumped back to his personal best in April. | Source: Gallup

50% approve of his handling of the coronavirus compared to 48% that don’t.

Crucially, the new boost in ratings come from independents. This group holds the key to Trump’s re-election in November.

Trump’s plans to re-open America and support the economy is playing well with his base and undecided voters. It could give him the edge over Biden going into the election, and that will boost investor sentiment, too.

Dow Jones could see a big summer rally

As America emerges from lockdowns and Trump throws support behind the economy, we could see another upswing. Fidelity’s Jurrien Timmer says there is optimism in the market.

The market is starting to move towards looking at the light at the end of the tunnel.

This wouldn’t be an unprecedented move. Election years often see a big swing to the upside over summer. The average gain in the summer months of an election year is 6.7%. Timmer cautions that the markets will need another big catalyst, though.

At this point the market has rallied about as much as it’s going to while we’re waiting for the pace of the re-open and the risk of another wave.

In the meantime, corporate earnings reports continue to roll in. On today’s agenda, we’ll hear from General Motors, Shopify, PayPal, Lyft, Square, Fitbit, Twilio, and Zynga.

Samburaj Das edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

Last modified: May 6, 2020 2:07 PM UTC

@_ben_brown

Ben is a journalist with a decade of experience covering financial markets. Based in London, UK, his writing has appeared in The Huffington Post and he was Chief Editor at Block Explorer, the world's longest-running source of Blockchain data. Reach him at benjamin-brown.uk, Twitter at _Ben_Brown or MuckRack. Email ben @ benjamin-brown.uk.