U.S. stock futures suggested the market would continue to move higher on Wednesday, following a big rally in the previous session that was fueled by a growing belief the worst may be over for the world’s largest economy.
Dow Jones Industrial Average rose 188 points, or 0.7%. S&P 500 futures were up 0.6% while Nasdaq-100 futures traded 0.5% higher.
U.S. equities rallied on Tuesday, helped by a bevy of bullish news, including a historic jump in retail sales. The U.S. government reported a record 17.7% increase in retail sales for May.
Stocks were also helped by a Bloomberg News report that the Trump administration is preparing a near $1 trillion infrastructure bill. Positive trial results showed dexamethasone — a widely available drug — can help critically ill coronavirus patients, which also boosted equities. The treatment reportedly reduced Covid-19 deaths in hospitalized patients by up to one third.
“It’s hard to keep a ‘well supported’ stock market down,” Jim Paulsen, chief investment strategist at the Leuthold Group, told. “Against a backdrop of widespread caution after a swift 7% decline in the recent days, the stock market was simultaneously bombarded by major pillars of support.”
Federal Reserve chairman Jerome Powell’s semiannual two-day testimony to the Senate banking committee started on Tuesday. The Federal Reserve’s announcement to beef up monetary stimulus with direct purchases of corporate bonds on Monday boosted sentiment.
Markets and bond yields fell from their highs following Federal Reserve Chair Jerome Powell’s comments that the central bank would arrange its corporate bond buying based on market conditions and it doesn’t want to “run through the bond market like an elephant.” Powell will have his second day of testimony on Wednesday.
Stocks also pared gains amid reports saying Beijing will shut down all schools amid a resurgence in coronavirus cases. Investors, for now, are largely shrugging off the uptick in coronavirus cases at home and abroad against the backdrop of better-than-expected economic data.
“The attitude of many Americans seems to be that they are done with the coronavirus, but the coronavirus is not done with us,” Marc Odo, portfolio manager at Swan Global Investments, told CNBC. “The large run up in the market was predicated upon everything going right and a return to normal in short order. However, the regional spikes in infections is challenging that optimism.”
After last week’s drop in stocks, the major average are all well in the green so far this week. The Dow Jones Industrial Average is up 2.7% week to date. The S&P 500 and Nasdaq Composite have gained 2.7 and 3.2%, respectively, since Monday.