The three major indexes closed in the green on Wednesday, as investors focused on economic recovery stemming from business activity rising across the country. Investors chose to ignore the rising tensions between the United States and China and piled their optimism on the post-lockdown economic revival instead. Wednesday’s uptick marked Dow Jones’ second day of more than 500-point rally. The benchmark closed above 25,000 for the first time since March.
The Dow Jones Industrial Average closed at 25,548.27 after rising 2.2%, the broader S&P 500 reached 3,036.13 after increasing 1.5% and the tech-laden Nasdaq Composite hit 9,412.36 after inching 0.8% higher.
The fear-gauge CBOE Volatility Index (VIX) rose 3.5% to close at 28.58 on May 27. Finally, advancing issues outnumbered declining ones on the NYSE by a 3.81-to-1 ratio.
U.S.-China Tensions Pile over Hong Kong
On May 27, Secretary of State Mike Pompeo announced in a tweet that he “reported to Congress that Hong Kong is no longer autonomous from China”, keeping the facts in mind. He also said that “United States stands with the people of Hong Kong”. Pompeo’s words could potentially revoke special U.S. economic privileges that Hong Kong has been receiving over the past two decades.
Congress had passed the Hong Kong Human Rights and Democracy Act in 2019, which requires the Secretary of State to annually certify Hong Kong's autonomy from mainland China, which the United States has deemed necessary for asserting U.S. policy in the region.
Pompeo’s announcement could make way for President Donald Trump to invalidate the special treatment given to Hong Kong’s economy. Trump had said on Tuesday that he planned to make an announcement by the end of this week concerning China’s efforts to inflict new security laws that would dent Hong Kong’s autonomy.
Economic Activity Fell Through May 18, Fed Said
Federal Reserve, in its Beige Book released on May 27, noted that economic downturn in the country had been in full swing through mid-May. Economic activity had fallen alongside a sharp decline in employment, per the latest survey of economic conditions.
The Fed noted that industries such as leisure and hospitality continued to incur losses because of the stringent lockdown measures. Factory activity and agricultural conditions weren’t good in the country. The only positive aspect of the data was the revival in auto sales in mid-May.
Providing an outlook for the Apr-June quarter, the Fed noted on Wednesday that economic growth was going to contract sharply. In addition, New York Fed President John Williams and St Louis Fed President James Bullard on May 27 said that the U.S. economy could hit a bottom in May or June and then witness a strong recovery in the second half of the year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Made Headlines
Nutanix's Earnings and Revenues Beat Estimates in Q3
Nutanix NTNX incurred third-quarter fiscal 2020 loss of 69 cents per share, beating the Zacks Consensus Estimate by 18.8%. (Read more)
HP Plunges as Supply-Chain Disruptions Hurt Q2 Earnings
HP Inc. HPQ stock depreciated more than 5% during the extended trading session yesterday after the company reported year-over-year declines in second-quarter fiscal 2020 earnings and revenues. (Read more)
Southern Company Targets Net-Zero Emissions by 2050
The Southern Company SO recently announced long-term greenhouse gas emission reduction goal of reaching net zero by 2050. (Read more)
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