- The Dow Jones rose on Friday but traded well off its highs in late afternoon trading.
- Stocks tumbled after a strong open, but Boeing supported the Dow.
- JPMorgan Chase is still pushing investors to buy the dip, while ING fears that retail strength could soon fade as pent-up demand wanes.
The Dow Jones rose on Friday, though the market was knocked from its highs as upward momentum faded in the wake of Thursday’s tremendous loss.
Though Larry Kudlow was front and center on Fox News selling the narrative that the pandemic will not see a second wave, Wall Street appears far less confident.
Dow Wavers as Early Morning Rally Fizzles
All three of the major U.S. stock market indices made positive moves to end the week, though those rallies were far outstripped by the previous day’s plunge.
- The Dow rose 247.27 points or 0.98% to 25,375.44.
- The S&P 500 rallied 0.51% to 3,017.52.
- The Nasdaq advanced 0.22% to 9,513.42.
There was some good news on the data front, as Michigan consumer sentiment beat forecasts. Although still well off its yearly highs, the stabilization of this important economic fundamental will make for encouraging reading for strategists on Wall Street.
What does not make good reading for Dow bulls are the virus statistics coming out of U.S. states like Arizona, Texas, and California.
Donald Trump’s top economic advisor, Larry Kudlow, took to Fox News to try to discredit the idea that there is a second-wave brewing:
Some top health researchers agree with him – but only because their prevailing view is that we are still dealing with the first wave.
Kudlow’s thesis has a bit more purchase among investment analysts, though it’s by no means the consensus view. In any case, JPMorgan’s Marko Kolanivic is telling investors that it’s time to buy the dip.
Given everything we learned… we think it is unlikely we will see a second wave in terms of fatalities or a need for broad economic lockdowns. Unless these circumstances change, we think investors should be buying the dips.
It will be a long weekend for investors, especially given that a lot of bulls are sitting on some sizable gains after the rally over the last few weeks. The volatility in the Dow is tremendous, and it would seem that decimated bears are finally finding their feet.
Looking ahead to the most important events for the United States next week, economist James Knightley at ING believes we could continue to see some pent-up demand released in retail sales. But he’s concerned that this could prove temporary:
Given car sales numbers have rebounded strongly we expect robust retail sales, but significant pent-up demand means we see upside for spending more broadly, especially given that the uprating of unemployment benefits has boosted incomes…
However, social distancing, consumer caution and the fact employment remains nearly 20 million below the levels of February means gains after this initial re-opening surge will be more challenging to come by.
Dow 30 Stocks: Boeing Keeps the Index Airborne
On a volatile afternoon of trade for the Dow 30, it was Boeing stock that was doing much of the heavy lifting. An 8.7% bounce, following several days of enormous losses, showed Boeing continuing to track closely with the performance of domestic airline stocks.
Some data suggests that demand for air travel continues to increase steadily, and this is of course great news for a planemaker of Boeing’s stature.
Apple stock was flat on the day, while JPMorgan Chase (+1.4%) and Goldman Sachs (+2.7%) received a bump as yields steadied.
It was noteworthy to see that one of the worst-performing stocks in the index was defensive consumer play Walmart (-2%), suggesting some of its pandemic premium is starting to be unwound.