Wall Street retreats after rally as focus shifts to Fed meeting

Wall Street retreats after rally as focus shifts to Fed meeting

Wall Street retreats after rally as focus shifts to Fed meeting

Wall Street's enthusiasm about the reopening economy sent stocks scrambling even higher on Monday, and the Nasdaq composite wiped away the last of its coronavirus-induced losses to set a record.

The S&P 500 posted 18 new 52-week highs and no new lows; the Nasdaq Composite recorded 83 new highs and no new lows.

The National Bureau of Economic Research said, "The unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions".

"Equities continue to trend higher in anticipation of improving economic conditions", said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. The jobs report will most likely be discussed at the meeting.

Still, the economy has a long hard path to recovery ahead of it.

That puts more pressure on economic reports this week to confirm that Friday's jobs report was a true inflection point in the long road back to a full recovery and not just an aberration.

Meanwhile, the Federal Reserve expanded its Main Street Lending Program, allowing more companies to participate and lessening the burden on banks that create the loans. The Fed's promise of enormous, unprecedented amounts of aid helped stocks begin their rally, and investors want to see what its reaction will be to the recent upturn in jobs numbers. Buchanan said several factors - including last week's record-setting jobs report - are signaling a much quicker-than-expected turnaround following and have boosted beaten-down stocks such as airlines and cruise lines.

Treasury yields have been climbing in recent days, reflecting rising expectations in the market for the economy and inflation. The 10-year Treasury yield dipped to 0.88% from 0.90% late Friday, but it's up sharply from 0.66% a week earlier. It can also be a heavy weight on the stock market.

It's a continuation of the remarkable turnaround for United States stocks, which plunged into a bear market in mid-March when the U.S. economy started to shut down because of coronavirus. Facebook rose a modest 0.3%, while Microsoft was up 0.6% and Netflix was virtually flat.

"It's hard for the retail investor, for the institutional investor as well, to understand how the market can be back to where it started (the year), given the damage that's been caused to the economy".

In global markets, Japan's Nikkei 225 index jumped 1.4% after the government reported the economy contracted at a 2.2% annual rate in the January-March quarter, better than the initially estimated minus 3.4%.

Oil was down, even after major oil producing nations agreed over the weekend to extend a production cut of almost 10 million barrels of oil a day through the end of July to counter the blow to demand from the coronavirus pandemic. I see it capped on the high end by valuation constraints, the lack of solid visibility on earnings, COVID-19 developments and tenuous US-China relations.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 0.7% and the pan-European STOXX 600 index .STOXX was down 1.4% at the USA market open.

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