As May Begins, Investors Look Forward to the Reopening of the Economy

Last week the market had a great rally, resulting in stocks finishing significantly higher. U.S. stock indexes continued to shake off worries posting positive gains ranging from approximately 3% to 6%. Oil continued to firm and post gains. This was fueled by oil companies reducing production quicker than anticipated and the demand gradually increasing with some parts of the global economy beginning to reopen. For the second week in a row, small-cap stocks outperformed the broader U.S. stock market by a wide margin. Russell 2000 index, a small-cap benchmark, added nearly 6% for the week. Nasdaq also rose a strong 6%, and the NASDAQ has risen 33% from a recent low on March 23 largely due to powerful performance from technology stocks. Even the S&P 500 managed to get back nearly half its losses from the highs it recorded earlier in 2020. The stock market has staged a dramatic rebound - and investors are betting more optimistic days are ahead of us.

The Nasdaq Composite was at the forefront with a 6% gain, followed by the Russell 2000 with +5.5%, the S & P 500 at 3.5% and Dow Jones Industrial Average at +2.6%.

Monday, May 4, 2020

The first trading day of the new week saw stocks rise into the close of the day. The early part of the session saw some weakness and uncertainty due to the continued uncertainty with regards to reopening the national economy 
Two factors Wall Street took note of were the threat from the White House over the weekend of another round of tariffs on China for lack of transparency about the coronavirus; and Warren Buffet’s comments that Berkshire Hathaway dumped off its total stakes in the airline sector due to the coronavirus outbreak. In the S&P 500, airline shares lost heavily following Buffet’s comments – Delta Air Lines, Inc. DAL, United Airlines Holdings, Inc. UAL and American Airlines Group Inc. AAL fell 6.4%, 5.1%, and 7.7% respectively. S&P 500 Tech stocks gained, with Apple, Amazon, and Microsoft providing the biggest lifts.

The Dow Jones Industrial Average (DJIA) that was off by more than by 362 points intraday- managed to gain by 26 points at the close. The Nasdaq rose 106 points, while the S&P 500 had a 12-point rise. The sectors that performed best were technology and energy. Industrial and financial stocks were caught behind. Nasdaq closed at 8,710.71, while Dow Jones and S&P 500 closed at 23,749.76 and 2,842.74, respectively.

Tuesday, May 5, 2020

The Monday turnaround continued into Tuesday, and the prime driver of this trend was the hope that the economy of the country would reopen as the coronavirus-enforced shutdown started easing. Oil prices continued the positive momentum, rising for the fifth day in a row. Tech and energy sectors were the big gainers. Healthcare stocks soared on reports of progress in coronavirus treatment and vaccine trials.  The 11 major sectors of the S&P 500 were in positive territory with healthcare and tech stocks leading and rising more than 1%. Just as on Monday, tech stocks continued their rally and gains in Apple Inc. AAPL, Microsoft Corporation MSFT, and AMZN put the market in positive territory. Crude price increased for the 5th day consecutively and prices rose by 30% so far in May. West Texas Intermediate rose 20.45%; Brent rose 13.86%

The Dow Jones had a 420-point gain by noon. Nasdaq also climbed, registering the second consecutive day of growth, with the tech sector again being the prime contributor. The S&P 500 also experienced gains. The index closed at 2,868.44. Dow Jones closed at 23,883.09 while Nasdaq ended the day at 8,809.12.

Wednesday, May 6, 2020

On Wednesday, stocks rose initially. The Dow rose above 24,000 again in the early part of the day. But more selling in the latter part of the day pulled it back to experience a 117-point decline. But it did rise past the breakeven point by 1:00 PM. It was the technology-dominated Nasdaq that was the leader again, experiencing a rally of 100 points. Nasdaq closed at 8,854.39, while the Dow Jones and S&P 500 closed at 23,664.64 and 2,848.42.

4 of the major S&P 500 benchmarks ended in positive territory – technology stocks continued the upward trend on the third day consecutively. Shares of MSFT, AAPL, and AMZN gained. With the Treasury Department announcing on Wednesday that they would launch a long-planned 20-year bond to meet the federal government’s borrowing needs triggered by the coronavirus outbreak, the S & P financials index ended negatively.

Thursday, May 7, 2020

The day started on the upside. There was the optimism that the businesses of the nation were gradually reopening albeit in a very limited scale. The three major stock indexes closed in green -- the S&P 500 at 2,881.19, while Nasdaq and Dow Jones closed at 8,979.66 and 23,875.89 respectively. The major gains were in the energy, financials, and materials sectors. Nasdaq Composite rose 1.4% mainly because of the powerful performance of large-cap tech stocks -- the index overcame losses for 2020 and is in positive territory year-to-date.

Friday, May 8, 2020

The day was marked by the revelation of the jobs report of April. The unemployment rate was reported to be the highest ever in 80 years, at 14.7%. Unemployment is expected to rise by over 20% in the coming months. The data showed that the U.S lost around 20.5 million jobs last month. It was forecast that there would be a drop in employment of 21.5 million. The unemployment rate had risen to 14.7% in April; the forecast was 16%. The equity futures that were up before the release of the report, rose further after the release. This is because the data, though distressing, was better than what was predicted with fewer jobs lost and a lower jobless rate than the forecast figures.

The Dow Jones closed at 24,331.32, while the S&P 500 closed at 2,929.80 and the Nasdaq Composite Index at 9,121.32.

On Friday, stocks of companies that would gain from the reopening of the economy rose – MGM Resorts closed 4.42% higher; Disney advanced 3.40%; American Airlines advanced 4.8% and Delta rose 6.29%, while United advanced 11.74%.

To conclude, investors will be keenly watching out for news related to the coronavirus while also looking ahead to the reopening of the economy.


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