Nasdaq rallies more than 1%, closes positive for 2020

Long term fundamentals for the U.S. dollar have deteriorated: Standard Chartered
Long term fundamentals for the U.S. dollar have deteriorated: Standard Chartered

The Nasdaq Composite rose for a fourth straight day on Thursday, clawing back its steep losses for the year, as tech shares added to their recent strong gains while investors mounted bets on the U.S. economy reopening soon. 

The tech-heavy index closed 1.4% higher at 8,979.66 as Apple shares gained 1%. Facebook, Amazon and Alphabet rose as well. For the year, it closed up nearly 0.1%.

Thursday marked the first time one of the major averages was up year to date since the coronavirus pandemic led to the closure of nonessential businesses, sparking massive layoffs and a historic market sell-off. 

The Nasdaq's rebound was led in large part by sharp gains in big tech stocks such as Facebook, Amazon, Apple, Netflix and Alphabet. Those stocks are all up at least 15.8% this quarter and are positive for 2020. Microsoft, another major tech stock, has rallied more than 16% this year and for the quarter.  

"While we have all become even more dependent on the products and services provided by the FAANGMs during the Great Virus Crisis, they might have become more immune to government regulation," wrote Ed Yardeni, president and chief investment strategist at Yardeni Research. "They have great balance sheets and generate lots of cash flow."

The Dow Jones Industrial Average also closed higher on Thursday by 211.25 points, or 0.9%, at 23,875.89. The S&P 500 gained 1.2% to close at 2,881.19. Still, both averages were down more than 10% for 2020. 

Stocks that would benefit from the reopening of the economy closed higher, including Hilton Worldwide and MGM Resorts. Hilton rose 1.6% higher while MGM gained 7.3%. Carnival closed more than 5% higher while Norwegian Cruise Line gained 7.9%.

"The equity market is telling you, as a leading indicator, that there are scenarios for the economy that aren't as draconian as some of the things you read in the press," said Tom Wright, director of equities at JMP Securities. 

Thursday's gains came even as another 3.17 million Americans filed for unemployment benefits last week, bringing the seven-week total to 33.5 million. But while jobless claims continue to rise, last week's tally was the lowest since shortly after the coronavirus was declared a pandemic.

"As awful as these figures are, it is the least amount of claims since mid March as we've likely cycled through the worst of the forced shutdown. We can now start analyzing the pace of reopenings, the level of business and what that new reality will look like," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. 

Stats are through May 21's weekly jobless claims report.

States such as California and New York have unveiled plans to gradually reopen their economies. Other states, including Georgia, have already let some nonessential businesses resume operations. 

"My worry is that, we get to the end of the month, more states start to go back to work, and demand is not to the level that the market would expect," said JJ Kinahan, chief market strategist at TD Ameritrade. At the same time, "when you think about this rally, where else are you going to put your money?"

Meanwhile, China posted better-than-expected exports for April. Data from the General Administration of Customs released on Thursday showed exports rose 3.5% in April, versus expectations of a 15.7% decrease from economists in a Reuters poll. Recent data out of China, where the earliest cases of the coronavirus were reported, have been closely watched by investors as the country was one of the first to ease lockdown measures.

In corporate news, Peloton reported revenues surged 66% during its fiscal third quarter as more Americans bought fitness equipment for at-home use during the coronavirus pandemic. Critically, Peloton said it is seeing demand from new customers who've been inspired to buy one of its bikes amid the Covid-19 outbreak. Peloton shares rose 16%.

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