Stocks advanced on Tuesday as the prospect of additional stimulus and a record jump in retail sales suggested the U.S. economy could bounce back sooner than expected, five months into its pandemic-inflicted recession.
All three major U.S. stock indexes, as well as Canada’s TSX, posted their third consecutive daily gain.
Data released by the Commerce Department showed U.S. retail sales jumped by a record 17.7% in May, blowing past the 8% increase analysts expected.
Investor risk appetite was given a further boost by the Trump administration’s anticipated $1 trillion dollar infrastructure package aimed at jump-starting the economy.
“The retail sales numbers is the story that’s driving markets higher,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina. “But the smell of stimulus in the air is adding to today’s gains for sure.”
Amid a resurgence of new COVID-19 cases in China and the United States, along with unabated progression of the pandemic in Latin America and elsewhere, a UK-led drug trial showed low doses of generic steroid drug dexamethasone reduced COVID-19 death rates among the most severe cases.
“We got potentially more positive news in the fight against COVID-19,” Detrick added. “But while COVID is in most peoples’ minds, in the stock market’s view it is all about reopening and the strong data suggest the recovery is happening and faster than most expected.”
At the beginning of his two-day testimony before Congress, Federal Reserve Chairman Jerome Powell said, “Until the public is confident that the disease is contained, a full recovery is unlikely.”
The Dow Jones Industrial Average rose 526.82 points, or 2.04%, to 26,289.98, the S&P 500 gained 58.15 points, or 1.90%, to 3,124.74 and the Nasdaq Composite added 169.84 points, or 1.75%, to 9,895.87.
Much stronger than expected homebuilder sentiment helped home improvement retailer Home Depot Inc provide one of the biggest boost to the blue-chip Dow.
The Dow and the S&P remain about 11% and 8% below their respective record closing highs reached in February, while the tech-heavy Nasdaq hovers about 1% below its all-time closing high reached on June 10.
The S&P/TSX Composite Index rose 156.17 points, or 1.02%, at 15,515.83. Most sectors were higher, except for materials, which lost 1.60%.
Oil prices rose 3% in volatile trade as Wall Street surged and the International Energy Agency (IEA) increased its oil demand forecast for 2020, but gains were capped by worries about a second wave of coronavirus cases.
Brent crude futures ended the session up $1.24, or 3.1%, at $40.96 a barrel while U.S. West Texas Intermediate crude (WTI) rose $1.26, or 3.4% to settle at $38.38 a barrel.
In its monthly report, the IEA forecast oil demand at 91.7 million barrels per day (bpd) in 2020, 500,000 bpd higher than its estimate in May’s report, citing higher than expected consumption during coronavirus lockdowns.
Still, the agency said a fall in flying because of the virus outbreak meant the world would not return to pre-pandemic demand levels before 2022.
Gold edged up on Tuesday as concerns over a fresh coronavirus outbreak in China countered the surge on Wall Street. U.S. gold futures settled 0.5% up at $1,736.50.
Read more: Stocks that saw action on Tuesday - and why
Reuters, Globe staff
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