Dow surges 750 points on retail spending data
Stocks rose sharply in early trading on Tuesday after new data on retail spending indicated the U.S. economy is back on the upswing.
The S&P 500 rose 2.8% in the first few minutes of trading Tuesday. The Dow gained more than 750 points, or 2.9%, and the Nasdaq rose 2.3%. All three indexes gave up their gains by midday.
Data released before market open showed that retail sales in the U.S. soared by a record 17.7% from April to May, double what economists were expecting and a welcome sign that spending is partially rebounding after the devastating coronavirus shutdowns. Industrial production also rose slightly in May after a sharp drop in March and April.
"Spending has started to recover more quickly than we had initially thought," Andrew Hunter, senior U.S. economist at Capital Economics, wrote in a note. "Nevertheless, there is still considerable uncertainty over whether spending will continue to recover at this pace over the coming months, particularly given the more recent upturn in new coronavirus cases in a number of states," he noted.
Traders were also encouraged by a news report that the Trump administration was considering a $1 trillion spending package on infrastructure.
The Fed announced Monday that it will buy individual corporate bonds as part of its previously announced program to keep lending markets running smoothly and allow big employers to get access to cash.
The move was the latest reminder the Fed is doing everything it can to help support markets, analysts said. Central banks have repeatedly come to the economy's rescue over the years, and it was huge, unprecedented moves by the Fed earlier this year that helped put a halt to the S&P 500′s nearly 34% sell-off on worries about the recession coming out of the coronavirus pandemic.
"In case the generosity of the Fed was in any doubt, it is not. Global equity markets are recovering quickly," after the Fed announcement, Stephen Innes, chief global markets strategist at AxiCorp, said in a report.