Stocks Open Higher, Extending Rally Into Fourth Week

By The Associated Press
Stocks are opening higher on Wall Street Monday, extending a rally into its fourth week. Banks and industrial companies had some of the biggest gains in the first few minutes of trading.

The S&P 500 index rose 0.4% Small-company stocks continued to outpace the rest of the market as investors upgraded their outlook for the economy. The S&P 500 is back within 5.3% of its record set in February, as optimism strengthens that the worst of the coronavirus-induced recession may have already passed. Its rise follows up on modest moves made in Europe and Asia. Treasury yields were holding near their highest levels in months.

Momentum continued in some markets from a rally on Friday, when the U.S. government said employers added 2.5 million workers to their payrolls in May, when economists were expecting them instead to slash another 8 million jobs.

That raised hopes that the worst of the recession may have already passed. But economists cautioned that many risks still loom on the long road to a full recovery.

“One should … be cautioned against reading too much into any single month-on-month change, particularly during such times of uncertainty,” Jingyi Pan of IG said in a commentary. 

After broad gains in Asia, European stock markets were less buoyant, with Germany’s DAX edging up 0.1% to 12,866 as the government reported that industrial production plunged by nearly 18% in April. That compared a nearly 9% drop in March at the height of Europe’s coronavirus lockdowns.

The CAC 40 in Paris fell 0.1% to 5,193, while Britain’s FTSE 100 was up 0.1% at 6,493. 

U.S. futures were higher, auguring more gains on Wall Street when it opens, with the contracts for the S&P 500 up 0.6% and those for the Dow industrials up 0.8%.

Crude oil prices were steady after major oil producing nations agreed over the weekend to extend a production cut of nearly 10 million barrels of oil a day through the end of July to counter the blow to demand from the coronavirus pandemic.

The price of oil had risen last week on expectations of that move, and lost some of its gains on Monday after OPEC officials did not commit to extending the cuts past July or establishing a way to enforce the production limits. And amid reports that output in the U.S., which is not part of the cartel, was rising again, OPEC said the outlook remained uncertain.

“The jurors are still out on demand. The jurors are still out on supply,” Saudi Oil Minister Abdulaziz bin Salman told a news conference on Monday.

U.S. crude for July delivery shed 24 cents to $39.31 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 1 cent to $42.29 per barrel.

In Asian trading, Japan’s Nikkei 225 index rose 1.4% to 23,178.10 after the government reported the economy contracted at a 2.2% annual rate in the January-March quarter, better than the initially estimated minus 3.4%.

Private sector spending was better than earlier reported, the Cabinet Office said. However, the first quarter came before Japan felt the full impact of partial shutdowns at home due to a nationwide state of emergency that has since been lifted. 

Economists cautioned, also, that the improved business investment numbers were likely to be further revised, downward. 

Elsewhere in Asia, Hong Kong’s Hang Seng ended flat at 24,776.77 and the Shanghai Composite index gained 0.2%, to 2,937.77. In South Korea, the Kospi edged 0.1% higher to 2,184.29. 

India’s Sensex added 0.5%, while Australia’s markets were closed for a holiday. 

The yield on the 10-year Treasury rose to 0.91% on Monday from 0.88% late Friday. Moving largely in tandem with expectations for economic growth and inflation, it is seen as a harbinger of risk and has shown much more caution than stocks recently.

Massive central bank stimulus has helped spur gains in share prices driven by hopes that economies will swiftly recover from the worst downturn in decades as governments relax lockdowns. 

Still, U.S. unemployment remains above 13%, nearly quadruple where it was at the start of the year, and on par with its level during the the Great Depression.

The biggest uncertainty is whether major virus outbreaks will return, leading to further shutdowns. 

Tensions between the United States and China are also raising worries the world’s two largest economies might resume their trade war. 

Some investors are also worried about volatility that could be created by this fall’s U.S. elections.

In currency markets, the dollar fetched 109.40 Japanese yen, down from 109.59 yen on Friday. The euro slipped to $1.1277 from $1.1288. 

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