U.S. stocks closed out another big month of gains last week, with the Dow Jones Industrial Average passing 25,000 and the S&P 500 breaching 3,000 for the first time in more than two months.
Stocks got off to a hot start to the week due to more encouraging news on the COVID-19 vaccine front. On Tuesday, Novavax announced it is beginning Phase I clinical trials of its coronavirus vaccine candidate. Pharmaceutical giant Merck also announced last week it will begin work on a vaccine, and Moderna reported positive data for its early-stage vaccine candidate earlier this month.
Investors were also encouraged by further signs of economic support from governments and central banks around the world. The European Commission announced a new economic stimulus package worth about $825 billion last week, while U.S. Senate Majority Leader Mitch McConnell said Congress will “probably” need to pass additional economic relief measures as well.
U.S.-listed Chinese stocks experienced volatile trading as geopolitical tensions between the U.S. and China once again heated up. The Senate has passed a new bill that threatens to delist Chinese stocks from U.S. exchanges if they do not comply with more rigorous financial oversight requirements.
China’s National People’s Congress has also approved a controversial new national security bill that would decrease the autonomy of the so-called Chinese special administrative region of Hong Kong.
“As soon as we get out of the COVID-19 thing, China will be a huge driver of volatility for markets," said Shawn Cruz, manager of trader strategy at TD Ameritrade. “If you think about how deep those supply chain relationships are ... if China decides to make things more difficult for us they can do it. It’s a known-unknown, and I think that’s why it drives so much volatility in markets.”
President Donald Trump signed an executive order targeting social media companies on Thursday after Twitter added fact-checking links to some of Trump’s tweets. Twitter CEO Jack Dorsey said he stands by the company’s decision, while Facebook CEO Mark Zuckerberg said he does not believe social media companies should fact-check politicians.
Earnings In Focus
Shares of Dollar Tree and Toll Brothers both gained more than 15% last week after impressive earnings reports.
This week, earnings season continues to wind down with reports from Dick’s Sporting Goods on Tuesday, Campbell Soup on Wednesday, and Gap and JM Smucker on Thursday.
More than a third of all S&P 500 companies have withdrawn their full-year 2020 earnings guidance, according to FactSet.
Despite the strong stock market performance, investors will likely get an economic reality check this week when the European Central Bank makes its interest rate decision and monetary policy statement on Thursday and the U.S. Labor Department releases its monthly jobs report for May on Friday.