The equity advance came the same day that the National Bureau of Economic Research (NBER) announced Monday that the U.S. economy entered a recession after peaking in February, bringing what had been the longest expansion since World War II to an end. Still, the backwards-looking call did little to knock markets off their steady trend higher.
“We’ve been telling people to ignore the economic data,” Brent Schutte, Northwestern Mutual chief investment strategist, told Yahoo Finance’s The Ticker on Monday. “The market is a forward-looking mechanism – it’s looking forward to a better future, it’s reflecting the fact that we’re opening large swaths of the U.S. economy without significant spikes in cases.”
“We do suspect that in the future, while the returns certainly aren’t going to be what they are today or what they have been over the past few months, there still is value left in different parts of the market for investors,” Schutte said. He said he still sees value in cyclical stocks that will benefit most from the reopening, along with some domestic small- and mid-cap companies and some international stocks.
Others pointed to the massive stimulus efforts by the Federal Reserve as a key driver of the S&P 500’s striking 44.5% rally since its March 23 closing low.
“The stock market is being driven by liquidity and hopes for a vaccine; both likely will persist,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note.
“Rapid money supply growth is not enough alone to boost stocks, but earnings likely will rebound. It’s hard to be bearish, though renewed lockdowns and vaccine disappointments are real risks,” he added.
The Fed on Monday expanded the scope of its Main Street Lending Program first announced in mid-March by lowering the minimum loan size, raising the max loan limit and extending the loan terms to five years to incentivize participation in the program. The Federal Open Market Committee kicks off the first day of its two-day meeting Tuesday, and will issue its latest monetary policy decision Wednesday.
6:03 p.m. ET Monday: Stock futures little changed to kick off overnight session
Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:03 p.m. ET:
S&P 500 futures (ES=F): 3,224.5, down 3 points or 0.09%
Dow futures (YM=F): 27,534.00, up 7 points, or 0.03%
Nasdaq futures (NQ=F): 9,877.00, down 7.75 points, or 0.08%
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