The market finished higher on Wednesday, thanks to solid retail earnings and increasing optimism on Wall Street about an economic recovery, with stocks shrugging off President Trump’s latest criticism of China over its handling of coronavirus.
The Dow Jones Industrial Average rose 1.5%, nearly 400 points, on Wednesday, while the S&P 500 was up 1.7% and the Nasdaq gained 2.1%.
Tech shares led the gains on Wednesday: Facebook and Amazon both hit new all-time highs, with their stocks rising 6.4% and 2%, respectively.
The market managed to move higher despite President Trump again criticizing China about its handling of coronavirus, blaming the country’s “incompetence” for “this mass Worldwide killing.”
His hard-line stance on China has some experts worried that he could terminate the phase one trade deal, which he has threatened to do in the past.
Stocks fell from their session highs after the Senate passed a new bill that would increase financial oversight of Chinese companies and ban some of them from listing on U.S. exchanges, like the Nasdaq or NYSE.
What to watch for
“I do not want to get into a new Cold War,” Senator John Kennedy (R-La.), who introduced the bill to ban Chinese companies from U.S. stock exchanges, said on Wednesday. “All I want, and I think all the rest of us want, is for China to play by the rules.”
The market rally on Wednesday comes amid a volatile week so far on Wall Street. On Monday, stocks had their biggest rally in six weeks, with the S&P and Dow both rising by more than 3% amid rising optimism over a coronavirus vaccine. Biotech company Moderna reported positive data from its early-stage coronavirus vaccine trial, causing its shares to surge 20% and leading the market higher. But stocks fell on Tuesday, after a report from STAT News raised concerns about Moderna’s trial results. The Dow lost 1.6%, almost 400 points, while the S&P 500 was down 1% and the Nasdaq 0.5%. The Congressional Budget Office released a bleak outlook on economic growth and unemployment on Tuesday, predicting a 38% drop in second-quarter GDP as 26 million Americans remain without a job. In a joint testimony before the Senate the same day, Treasury Secretary Steven Mnuchin warned of the “risk of permanent damage” if state economies remain closed for too long, while Federal Reserve Chairman Jerome Powell said that more policy action may be necessary to offset the long-lasting economic damage caused by unemployment.
“It seems traders should treat every trial result with caution, given the volatility around both Gilead and Moderna announcements over recent weeks,” says Joshua Mahony, senior market analyst at IG. “Every specialist seems to indicate that a vaccine will take some time to develop, yet markets treat each trial announcement like we are on the cusp of a huge breakthrough that could see everything swiftly return to normal.”