Inventories rose for a third day as optimism about a recovering US economy outweighed concerns about a worsening of coronavirus cases in places from Texas to China. Treasury yields rose and the dollar strengthened.
The S&P 500 rallied the strongest in more than a week, with Energy, Healthcare and Materials leading across all 11 industry sectors. The benchmark index rose earlier after data showed that U.S. retail sales rose the most. The chairman of the US Federal Reserve, Jerome Powell, said in his biannual policy report to Congress that the US economy may have bottomed out.
“There are more cross-currents right now than I can ever remember,” said John Porter, chief investment officer for equities at Mellon Investments. “The weight of what investors focus on every day really varies greatly from the fears of the second wave, the fear of escalating tensions with China and the complete vacuum of visibility of profits.
Government incentives were a key feature of the global equity rally, despite rising unemployment and signs that a second wave of the virus is looming. Now there are signals that more economic support is on the way.
The Trump administration is preparing an infrastructure proposal of nearly $1 trillion as part of its push to revive the world’s largest economy, according to people familiar with the plan. In addition, the Fed will start buying individual corporate bonds.
“The Fed is delivering on its promise to do whatever is necessary,” said Todd Jablonski, Chief Investment Officer at Principal Portfolio Strategies. “However, they cannot compensate for the volatility associated with risky investments as the number of cases increases”.
Elsewhere, the price of oil in New York climbed to over 38 dollars a barrel amid signs of improving demand and falling production.