Wall Street starts off with a bang, start of a week rich in earning reports
(New York) The New York Stock Exchange closed on a positive note Monday, encouraged by the hope of seeing the economy reopen soon, at the start of a week rich in corporate results and meetings of central banks.
Its flagship index, the Dow Jones Industrial Average, gained 1.51% to 24,133.78 points, and the highly technological NASDAQ, 1.11% to 8,730.16 points.
The broader S&P 500 Index, which represents the 500 largest companies on Wall Street, appreciated 1.47% to 2878.48 points.
“The market is just delighted to see that some states in the United States have started to reopen their stores and that it seems that deconfinement is looming in New York,” said Peter Cardillo of Spartan Capital Securities.
The governor of New York, the epicenter of the pandemic in the United States, has announced the possible reopening of certain manufacturing activities and construction sites after May 15 in the least affected areas of the state.
Several European countries, notably Spain and Italy, have also started to restart their economies.
Some of the companies that could particularly benefit from a gradual return to normal life climbed a lot on Monday, like the MGM Resorts casino group (+ 9.25%) or the clothing store chain Gap (12, 9%).
Some experts warned, however, that there was too much optimism.
“The economic indicators to come this week and the continuing fall in oil prices should put a stop to this optimism,” anticipates Cardillo.
The ratio of corporate stock prices to profits is currently higher than mid-February, before the pandemic hits the US economy hard, Patrick O’Hare of Briefing said.
It is, in his eyes, “an additional indication of the divorce between the market and reality”.
Market players were preparing for the publication of numerous results from companies including General Electric (+ 2.56%) or tech giants Apple (+ 0.07%), Microsoft (-0.29%), parent company of Google, Alphabet (-0.27%) and Amazon (-1.42%).
Boeing (-0.33%), which will also release its quarterly results on Wednesday, warned at its annual general meeting on Monday that global air traffic will not return to its pre-pandemic levels for several years.
According to FactSet, companies in the S&P 500 are expected to see profits fall by 15.2% on average in the first quarter and their sales will stagnate. The blow should be even harder in the second quarter, analysts currently predicting a 31.9% plunge in profits and an 8.2% drop in sales.
Market participants also welcomed the Bank of Japan’s strengthening of its asset buy-back programs, a new support measure for the world’s third largest economic power, a few days before a meeting of the American Central Bank (Fed), Wednesday, and its European counterpart, Thursday.
On the bond market, the 10-year rate on US treasury bills rose, moving around 8:20 p.m. GMT to 0.6573% against 0.6008% on Friday evening.
General Motors, which decided to suspend its dividends and its share buyback program to preserve as much cash as possible in the short term, gained 2.28%.