The strong rally Tuesday foreseen by futures saw the Dow Jones Industrial Average soaring over 900 points by mid-day but sputtering quickly in the afternoon to send all three indices plunging to a loss at the closing bell. The indices were still up more than 1% 10 minutes before they called it a day.
The dispiriting finish to a vigorous start was chalked-up to renewed investor worries over a deep recession and the lingering fears, however improbable, of depression this year. The accelerating sell-off that began past noon saw the Dow sink 0.12% to 22,653.86 for a loss of 26.13 points at day's end. The S&P 500 slid 0.16% to 2,659.41 while the NASDAQ Composite dropped to 7,887.26, a loss of 0.33%. The major averages, however, have rallied 20% from their March 23 lows.
The wimpy ending came after a promising start. Fueling the early optimism was news the COVID-19 global hotspots of Italy, France and Spain was together reporting uplifting signs their massive infection curves were finally flattening. At home, New York State governor Andrew Cuomo welcomed data showing COVID-19 cases in his state remaining relatively stable from April 2 to 5, as were deaths.
Cuomo, however, said it's still too early to tell if the data is the beginning of the eagerly anticipated flattening of the curve. Cuomo was referring to data from April 2 to 5, which showed 30,000 new cases on April 2; 32,100 cases the next day; then 33,260 cases and a new low of 28,200 Sunday. New York State also reported 594 new coronavirus deaths on Sunday compared to 630 on Saturday, which is the first daily decline in coronavirus-related deaths.
"Incoming data suggest NY State might peak sooner than Cuomo's optimistic case," said Tom Lee, head of research at Fundstrat Global Advisors, LLC on Monday. "With better visibility on the healthcare crisis in the US, particularly, on a potential to model a national peak, we believe buyers are now taking control."
Some investors, however, saw stock prices as getting ahead of the reality where coronavirus shutdowns are likely to damage the U.S. economy significantly beyond the second quarter.
"Investors chose to accentuate the positives, as they have been mostly doing since the bear-market low," said Ed Yardeni, president and chief investment strategist at Yardeni Research. "In our opinion, we are in the midst of a Great Rebalancing away from bonds and into stocks."
"The bear market has most likely discounted a depression-like recession packed into Q2 and Q3. It certainly hasn't discounted the possibility of an actual apocalyptic depression lasting through at least 2021 and beyond. On the contrary, the market's recent action suggests that investors are betting on an economic recovery starting during Q4 and continuing through 2021."
Crude oil continued to tumble from its recent peak, diving 7% to $24 per barrel. Gold prices also fell in risk-on trade, losing around 0.85%.
