Wall Street closed sharply higher on Wednesday buoyed by investors jubilation on reopening of the U.S. economy and potential of more stimulus from the Federal Reserve. On the other hand, the U.S. Senate has cleared a bill to delist Chinese companies. All three major stock indexes closed in the green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) gained 1.5% or 369.04 points to close at 24,575.90. Notably, 23 components of the 30-stock blue-chip index ended in green while 7 finished in the red. Meanwhile, the S&P 500 surged 1.7% to close at 2,971.61. The Energy Select Sector SPDR (XLE), the Communications Services Select Sector SPDR (XLC) and the Technology Select Sector SPDR (XLK) rallied 4%, 2.8% and 2.2%, respectively. Notably, all eleven sectors of the benchmark index closed in the green.
Meanwhile, the tech-heavy Nasdaq Composite closed at 9,375.78, soaring 2.1% due to the weak performance of large-cap tech stocks. The biggest gainer of the Nasdaq Composite was Analog Devices, Inc. ADI with a Zacks Rank of #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The fear-gauge CBOE Volatility Index (VIX) decreased 8.3% to close at 27.99. A total of 10.68 billion shares were traded on Wednesday, lower than the last 20-session average of 11.36 billion. Advancers outnumbered decliners on the NYSE by a 4.23-to-1 ratio. On Nasdaq, a 3.70-to-1 ratio favored advancing issues.
Reopening of the Economy
Meanwhile, several states in the country are considering plans to reopen the economy systematically. States like Alaska, Connecticut, Georgia, South Carolina, Tennessee and Texas have already started allowing restaurants, salons, spas and barbershops to serve customers. Mike DeWine, governor of Ohio, has decided retail stores and other service industries to reopen. Andrew Cuomo, governor of coronavirus hotspot New York, said that the economy will be opened in phases.
On May 17, Fed Chair Jerome Powell said that the path to economic recovery post the pandemic maybe slow but one shouldn’t doubt the economy’s capabilities. Per Powell, the central bank has enough ammunition to help the economy sail through these trying times. He has categorically mentioned that there is “no limit” to what the Fed can do to inject money into financial markets.
Fed Chairman expressed optimism and believes that the economy will start recovering in the second half of this year, provided there isn’t a second wave of coronavirus. He thinks that economic growth will improve in the July-September quarter, and “it will take some time to peak.” However, he admitted that a full recovery is possible only after the arrival of a vaccine.
Delisting of Chinese Companies
On May 20, the U.S. Senate cleared the Holding Foreign Companies Accountable Act. The act will make it compulsory for the Chinese companies to adhere to U.S. securities law otherwise they will be delisted from U.S. stock exchanges and will be restricted from raising money from American investors.
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