The Dow Jones Industrial Average (DJIA) clawed out an aggressive rally on Monday after Italy turned a corner in its battle with the coronavirus pandemic.
Supporting the rally was the U.S. biotech machine, and both Dow giant Johnson & Johnson and Abbot Labs fed the stock market positive COVID-19 headlines.
Those optimistic developments are crucial to this recovery. U.S. cases of COVID-19 exceed 150,000, and the rapid pace of the spread is certainly enough to give stock market bulls pause.
All three of the major U.S. stock market indices bounced on Monday, even as core stocks like Boeing endured steep declines.
In the commodity sector, the price of oil suffered another grisly session. U.S. crude slid 6.5% into the $20 handle and dipped as low as $19.27.
Pressured by a resurgent U.S. dollar and a rising stock market, gold dropped 1.3% in response to risk-on conditions.
While there wasn’t much on the economic data front, pending home sales were very strong in the United States in February, rallying 2.4% against expectations of a 1% decrease.
Unfortunately, the future does not look so bright for activity in the housing market, given that next month’s data will likely suffer the full brunt of the coronavirus impact.
Surging past 153,000 overnight, confirmed U.S. cases of COVID-19 far exceed any other nation in the world.
The good news is that Italy, the country with the most coronavirus-related fatalities, saw its lowest intake of new cases in two weeks, reporting an increase of 4,050 infections.
That’s a decrease of more than 1,000 from the previous day, and World Health Organization officials are optimistic that the peak is near for an embattled European economy.
This glimmer of light is undoubtedly bullish for the Dow Jones, where investors will be desperately using Italian data to try and plot the U.S. curve.
Yet it was more than just hard data driving the Dow’s Monday rally. Abbott Labs’ new five-minute coronavirus test could be a game-changer in the fight to gauge the scale of the outbreak.
While the Dow Jones remains in recovery mode, there’s no escaping the damage that’s battering virtually all sectors of the U.S. economy.
From commercial real estate to the embattled insurance industry, there are alarm bells going off everywhere.
The foundation of the real economy is unemployment, and a recent study from the Federal Reserve raised a concerning outlook about how bad conditions could get.
According to the central bank, unemployment – which began the year at five-decade lows – could spike as high as 32% due to coronavirus-related layoffs.
We simply took the average of those two numbers as a point estimate for the total number of workers who will be laid off during the second quarter. This resulted in 47.05 million people being laid off during this period. Summing to the initial number of unemployed in February, this resulted in a total number of unemployed persons of 52.81 million. Given the assumption of a constant labor force, this resulted in an unemployment rate of 32.1%.
Stock market bulls remain optimistic that the scope of these layoffs will be temporary. A tremendous number of people who have been laid off will be re-hired once the all-clear is given. But this all depends on how quickly the shell-shocked U.S. consumer recovers.
It was a solid – if unspectacular – day for most of the Dow 30. The index’s most heavily weighted stock, Apple (NASDAQ: AAPL), ticked 2.2% higher to $253.
Johnson & Johnson stock (NYSE: JNJ) jumped 7.1% on reports it will begin human testing of its coronavirus vaccine in September.
Risk-on play Caterpillar (NYSE: CAT) climbed 6%, while tech giant Microsoft’s stock (NASDAQ: MSFT) posted a 6.9% rally.
But another Dow Jones heavyweight, Boeing (NYSE: BA), lost its recent momentum. It plunged 7.4% on another hard day of trade for the U.S. aerospace manufacturer.
This article was edited by Josiah Wilmoth.