Dow Jones futures turned positive today morning after crashing 7% on Thursday on the report of rising COVID-19 cases. Analysts are weighing the impact of the economic reopening of the market.
On Thursday, June 11, the Dow Jones futures plummeted 7% or nearly 1900 points in its biggest single-day crash in the last three months. The market sentiment turned negative over the rising COVID-19 cases in some U.S. States after reopening post lockdown.
However, we have some positive development today as the Dow Jones futures have jumped over 300 points in early Friday trading and continue growing. Now futures have gained over 570 points. Broader market indices like the Nasdaq-100 futures and the S&P 500 futures indicated a positive start. Along with Dow, both of these indices suffered a major crash on Thursday.
On Thursday, the Johns Hopkins University released data showing the rise in new cases in the states of South Carolina, Texas, and Arizona. Soon the market sentiment turned negative after a winning start to June 2020. With the new cases surging does it mean, we can see a new phase of lockdown again.
Well, Treasury Secretary Steven Mnuchin has already cleared it that shutting down the economy is not an option with the U.S. The country has already suffered massive economic cost with the COVID-19 pandemic. However, the U.S. also remains the most-impacted country in the world with over 2 million coronavirus cases and over 100,000 deaths.
Morgan Stanley Investment Management’s Andrew Slimmon predicts that the market worries are still far from over. Speaking to the CNBC, Slimmon said:
“Given the magnitude of the rally, it would shock me if we had a one day sell-off and that’s it. The stocks that are up the most from the lows are still the risk-on, high beta, value, small-cap stocks. They’re still the big winners and I would suspect that there’s more pain to come near-term before the market clears out kind of this excessive speculation that we’ve seen recently.”
Will Economic Reopening Cheer Wall Street and Boost Dow Jones Futures?
Last week and prior, investors have been cheering the reopening of the economy. Preferably, the investors even chose to sideline the daily rising cases. However, it remains to be seen how long the optimism can continue further. JJ Kinahan, chief market strategist at TD Ameritrade said:
“We had gone straight up more than 30% without a real sell-off, so you’re due for one, and I don’t think it’s the worst thing in the world. As more states get back, the question becomes: Are they going to ramp up fast enough to please Wall Street? What you’re seeing is it’ll be hard to do that.”
The Dow Jones and the S&P 500 both are up 35% after hitting their bottom in late March 2020. A majority of these gains are contributed by the airline, banking and other retailer stocks that would have a direct benefit of the economy reopening. Adding to this, Kinahan said:
“Some of these stocks may have gotten ahead of their skis. When you see some of the airlines being priced at the levels they were before this all started when they say they’re going to do 60% of their business just doesn’t make sense.”
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.