What’s happening: US stock indices ended mostly higher on Friday, recording strong gains for the month.
What happened: With various states across the US lifting lockdown restrictions late last month, investor sentiment turned positive on hopes of an economic recovery.
US stock markets recorded a steep rise last week, as businesses across the country restarted their operations. The Nasdaq 100 was among the best performing last month, surging close to 7%, despite recoding limited gains last week.
While people have started feeling more comfortable, another shocking incident hit investor sentiment over the weekend, reigniting fears of an economic downturn.
Why it matters: In May, investors had started feeling optimistic about the easing of lockdown restrictions and various stimulus measures announced by the US government and central banks across the world.
US stocks recorded sharp gains in May. The Dow rose by 4.3% last month, with 3.8% gains last week. The S&P 500 logged a monthly rise of 4.5%, with 3% gains for the week. The Nasdaq 100 notched the strongest advance last month, rising 6.8% in May, with a weekly gain of 1.8%.
A dampener to market sentiment came in the form of the US President Donald Trump continuing to accuse China on the way it handled the pandemic, which has infected more than six million people globally. The Trump administration also came down heavily on China for imposing national security law in Hong Kong to tighten its control over the special administrative region. The announcement added fuel to the fiery tensions between Washington and Beijing.
President Trump announced plans to hold a press conference on Friday to discuss his latest moves related to China. This made investors concerned about the prospects of a trade deal between the two countries. Trump announced plans to suspend the entry of some Chinese nationals into the country and cut ties with the WHO (World Health Organization) during the conference. Much to the relief of investors in financial markets, the US President did not mention anything about increased tariffs, or the trade agreement signed with China earlier in January.
Investors are worried after violent protests erupted in the US over the death of an unarmed African American, who was killed in Minneapolis by police. The protests resulted in brutal clashes between the police and the public in various cities, further impacting efforts to recover from the pandemic. The protests also slammed retailer stores, including Walmart, Target and Nike, which are still trying to recover from the covid-19 crisis.
What to Watch: Investors will be keeping an eye on the impact of the violent protests that led to several retail outlets being damaged and looted over the weekend. The focus is likely to shift to the reopening of the economy and businesses restarting operations and turn investor sentiment positive.
Investors also await a basket of economic reports from the country, including manufacturing PMI, ISM manufacturing index and construction spending. The IHS Markit manufacturing PMI is expected to rebound to 39.8 in May, from 36.1 in April, while the ISM Manufacturing PMI is likely to rise to 43 in May, from a previous reading of 41.5. Construction spending, which increased 0.9% to an annual rate of $1.360 trillion in March, is expected to decline by 6% in April.
Markets will continue to assess the coronavirus figures, with the number of cases exceeding 6 million globally. The US has confirmed over 1,789,360 cases so far, with around 104,350 deaths.