The Dow Jones rallied strongly on Tuesday, as bullish momentum overshadowed economic and geopolitical risks.
The Dow Jones gapped higher at the open of trade on Tuesday. An impressive retail sales number helped sentiment, while Donald Trump remains confident about a vaccine by the end of 2020.
All three major stock market indices enjoyed a strong rally. Rising in tandem, the Dow Jones, Nasdaq, and S&P 500 all climbed around 2%.
In addition to the most recent jobs numbers, there was more evidence of a V-shaped recovery in the U.S.
Retail sales bounced a whopping 17.7%, buoyed by a resilient consumer.
Unfortunately, according to economist James Knightley at ING, this impressive number could mark a peak. With Federal assistance set to expire, Knightley has his eyes on the looming July deadline:
It is clear that huge fiscal and monetary support, including the extra $600 per week in unemployment benefit, has given households the income and the confidence to spend. However, this $600 extra payment ends in July, and we must remember that employment is still 20 million down on where it was at the beginning of the year.
Stocks received a massive boost Monday after the Federal Reserve announced it would start buying individual corporate debt.
However, Jerome Powell continued his pessimistic take on the economic outlook in his Congressional testimony Tuesday. Urging politicians to do more fiscally, the Fed president stressed his concerns about mass layoffs in state and local governments due to budget shortfalls.
Chris Beauchamp, Chief Market Analyst at IG, addressed the Fed’s stock market intervention in a recent comment.
According to the analyst, active central banks are here to stay as they strive to support liquidity and confidence, telling CCN.com:
While the timing of the Fed’s moves will be viewed as somewhat suspect, given that it comes just as the Vix spikes and equities take a dive. The reality is that activist central banks are a feature, not a bug, and will remain the driving force for markets.
In the geopolitical sphere, several major risk events are smoldering. Firstly, Beijing is being locked down amid a second virus outbreak, while the United States appears to be still dealing with its first wave.
Donald Trump helped lift the Dow intraday, as he continues to claim that a vaccine will be delivered this year.
Investors also had to shrug off North Korea’s destroying a joint liaison office with South Korea, while on the India-China border, multiple military casualties are reported.
It was a bright green day for the Dow 30, as almost every stock managed to rise.
Dow heavyweight Apple (NASDAQ:APPL) was the main driver with a 2% gain. Boeing (NYSE:BA) and Caterpillar (NYSE:CAT) chipped in with 3% and 4% gains, respectively. Microsoft (NASDAQ:MSFT) also had a big day, rising 2%.
Last modified: September 23, 2020 2:00 PM