U.S. stocks rose on Monday to start off the new month amid increasing hope of a successful reopening of the economy. Those gains come after back-to-back monthly increases for stocks.
The Dow Jones Industrial Average gained 91.91 points, or 0.4%, to close at 25.475.02. The S&P 500 climbed 0.4% to 3,055.73 while the Nasdaq Composite added 0.7% to end the session at 9,552.05. The S&P 500 closed at its highest level since early March while the Nasdaq ended the session at levels not seen since late February.
"Equity markets continue to display remarkable resilience in the face of a constant barrage of troubling developments, with investors continuing to focus on the positive signs of reopening," said Mark Hackett, chief of investment research at Nationwide. Hackett added, however, valuations are at their highest levels in nearly two decades, suggesting "markets are due for a breather following an unprecedented rally."
Stocks closely linked to the economy reopening led the slight gains. Carnival, Norwegian Cruise Line and Royal Caribbean were all up at least 6.7%. Hilton Worldwide climbed 3.3% and Marriott International advanced 7.4%. American Airlines and Delta advanced 5.8% and 3.8%, respectively, while United advanced 5.1%.
Those gains were slightly offset, however, by a 7.2% drop in Pfizer shares.
Monday's moves came after the S&P 500 and Dow each gained at least 3% last week while the Nasdaq Composite advanced 1.8% to close out May. Those gains were propelled by increasing bets by traders that the global economy will successfully reopen after the coronavirus forces a shutdown of most economic activity.
Last week's gains led the major averages to their first back-to-back monthly advances since late 2019. The Dow and S&P 500 gained 4.3% and 4.5%, respectively, for May while the Nasdaq Composite advanced 6.8%. Before May's gains, the S&P 500 surged 12.7% in April while the Dow gained 11%.
Here's what traders were monitoring to start the new month:
- States continue to reopen their economies after the coronavirus pandemic forced the country to shutter nonessential businesses. The reopening is now taking place amid widespread protests across the U.S. over police brutality.
- Traders are also grappling with rising tensions between China and the U.S. President Donald Trump said Friday the country would end its special treatment towards Hong Kong.
- The announcement came after China had approved a national security bill that would increase the mainland's power over the city. However, Wall Street breathed a sigh of relief as Trump did not say he would pull the U.S. out of the phase one trade deal reached earlier this year.
- Data showed China's manufacturing activity expanded in May. Investors have been monitoring China's economic data for signs of recovery in the country, where the coronavirus was first reported.
- Pfizer reported disappointing trial results for a breast cancer drug.
"Nothing that has happened since the market closed on Friday has been market positive," said Art Hogan, chief market strategist at National Securities. "When you think about clearly we're beginning to take U.S.-China tensions seriously and you add on to that the massive amount of disruption going on in almost every major city in the country right now, none of that could be seen as market positive."
"At the levels we're at, I wouldn't be surprised to see the market take a pause and pull back," Hogan added.
Monday's gains put the S&P 500 up 39% from its intraday low set on March 23.
"The main downside risk facing stocks is a second wave of the disease," said Peter Berezin, chief global strategist at BCA Research, in a note to clients. "If fears of a new outbreak were to escalate, risk assets would suffer."
Berezin added, however, he recommends a "modest overweight" portfolio allocation to stocks, noting: "Even if a vaccine does not become available later this year, increased testing should allow for a more economically palatable approach to containment strategies."
More than 6 million coronavirus cases have been confirmed globally, including over 1.7 million in the U.S., according to Johns Hopkins University. However, Novavax said last week is started Phase 1 clinical trials for its coronavirus vaccine candidate while Moderna said May 18 its early stage vaccine trial had yielded positive results.
—CNBC's Patti Domm and Eustance Huang contributed to this report.
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