Stocks Bounce Back from Yesterday’s Tumble…..

U.S. equities finished higher to recoup most of yesterday’s losses, as investor optimism surrounding the progress in reopening the global economy persisted, while another potential breakthrough out of the healthcare sector regarding results of a possible COVID-19 vaccine also boosted sentiment. Results from the retail sector again headlined the earnings front, with Target showing a surge in digital sales, while Lowe’s Companies topped Q1 expectations. Treasury yields moved lower amid a rise in bond prices and the U.S. dollar lost ground following the release of the minutes from the Federal Reserve’s April monetary policy meeting that showed palpable worry by Committee members. In other economic news, mortgage applications declined even as interest rates dipped. Gold and crude oil prices traded higher. Markets in Europe and Asia markets finished in the green.

The Dow Jones Industrial Average rose 369 points (1.5%) to 24,576, the S&P 500 Index increased 49 points (1.7%) to 2,972, and the Nasdaq Composite jumped 191 points (2.1%) to 9,376. In moderately heavy volume, 921 million shares were traded on the NYSE and 4.3 billion shares changed hands on the NASDAQ. WTI crude oil moved $1.53 higher to $33.49 per barre, but wholesale gasoline lost $0.01 to $1.04 per gallon. Elsewhere, the Bloomberg gold spot price increased $3.98 to $1,749.03 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.2% to 99.16.

Mortgage applications decline, Fed minutes show Committee’s angst…..

The MBA Mortgage Application Index declined 2.6% last week, following the prior week’s 0.3% gain. The decrease came as a 6.3% drop in the Refinance Index offset a 6.4% rise for the Purchase Index. The average 30-year mortgage rate declined 2 basis points (bps) to 3.41%.

In afternoon action the Federal Reserve released the minutes from its April monetary policy meeting, where it kept its policy stance unchanged. The report showed Committee members commented that, “In addition to weighing heavily on economic activity in the near term, the economic effects of the pandemic created an extraordinary amount of uncertainty and considerable risks to economic activity in the medium term.” One area of concern in particular was what may happen in the event of a surge in infections later in the year, noting, “A second wave of the coronavirus outbreak, with another round of strict restrictions on social interactions and business operations, was assumed to begin around year-end, inducing a decrease in real GDP, a jump in the unemployment rate, and renewed downward pressure on inflation next year.” As well, the Fed restated its commitment to use its full range of tools to support the virus-crippled economy and keep markets functioning smoothly.

Treasuries were higher, as the yield on the 2-year note was flat at 0.17%, while the yield on the 10-year note lost 2 bps to 0.68%, and the 30-year bond rate moved 3 bps lower to 1.41%.

©2020 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.