Stock Rally Off of March Lows Persists Amid Optimism…..

After a long Memorial Day holiday weekend, U.S. stocks extended last week’s rally, courtesy of continued optimism of a potential answer out of the Health Care sector to the COVID-19 pandemic as Dow member Merck & Co and Novavax offered some positive announcements. The upbeat sentiment on the COVID-19 fight appeared to soothe concerns regarding the duration of the severe drop in global economic activity, with the U.S. continuing to reopen, joining key regions in Asia and Europe. The U.S. dollar fell, along with gold prices, while crude oil prices traded higher and Treasury yields rose as bond prices slipped. Consumer Confidence modestly moved off of multi-year lows, aided by an improvement in expectations, while new home sales unexpectedly ticked higher, regional manufacturing activity improved and home prices rose. European and Asian markets mostly gained ground.

The Dow Jones Industrial Average jumped 530 points (2.2%) to 24,995, the S&P 500 Index increased 36 points (1.2%) to 2,992, and the Nasdaq Composite gained 16 points (0.2%) to 9,340. In moderately heavy volume, 1.1 billion shares were traded on the NYSE and 4.4 billion shares changed hands on the NASDAQ. WTI crude oil moved $1.10 higher to $34.35 per barrel, and wholesale gasoline rose $0.01 to $1.06 per gallon. Elsewhere, the Bloomberg gold spot price fell $19.18 to $1,712.77 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—dropped 0.8% to 99.02.

Consumer Confidence ticks higher as expectations rise, Treasury yields gain ground

The Conference Board’s Consumer Confidence Index ticked higher to 86.6 in May, from April’s downwardly-revised 85.7 level, and versus the Bloomberg estimate of 87.0. The index remained near 2014 levels as the Present Situation Index declined, but the Expectations Index of business conditions for the next six months improved. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—improved to -10.4 from the -15.7 level posted in April.

The May Dallas Fed Manufacturing Index improved more than expected but remained solidly in contraction territory (a reading below zero) as the coronavirus disruption continues to weigh on business activity. The index rose to –49.2 from -73.7 in April, and well above estimates of -61.0.

New home sales rose 0.6% month-over-month (m/m) in April to an annual rate of 623,000 units, well above forecasts calling for a drop to 480,000 units from March’s downwardly-revised 619,000 unit level. The median home price was down 8.6% y/y at $309,900. New home inventory dipped to a rate of 6.3 months of supply at the current sales pace from 6.4 months in March. April’s unexpected rise came as sales in the Northeast, Midwest and South all moved higher m/m, more than offsetting a drop in the West. Compared to last year, sales were solidly lower in the Northeast and West, but were higher in the Midwest and South. New home sales are based on contract signings, offering a timelier read on housing activity compared to the larger contributor of existing home sales, which are based on closings and tumbled in April.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index posted a 3.9% year-over-year (y/y) gain in home prices in March, versus estimates of a 3.4% increase. Compared to the prior month, home prices were 0.5% higher on a seasonally adjusted basis, versus forecasts of a 0.3% gain.

Treasuries mostly saw some pressure, with the yield on the 2-year note little changed at 0.17%, while the yield on the 10-year note gained 2 basis points (bps) to 0.68%, and the 30-year bond rate rose 6 bps to 1.43%.

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