Morning Minutes 6/16/2020

Morning Minutes

Stocks Rally with Infrastructure, Retail Sales and Central Bankers In Focus

June 16, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Building on yesterday’s resilience that saw US markets shrug off early losses to finish in the green, stock markets have continued to climb overnight and into this morning, boosted by a number of potentially positive developments. First off, reports have surfaced overnight President Trump is working on a $1 trillion infrastructure package to provide more fiscal stimulus to the economy.

Speaking of stimulus, the Bank of Japan continued to support its economy indicating that it could increase lending to companies to 100 trillion yen or about US$1 trillion from the previously announced 75 trillion yen and indicated that it intends to keep support going for some time. Investors may also look to North American central bankers for economic updates and indications of support with Fed Chair Powell testifying to Congress starting at 10:00 am EDT and Bank of Canada Governor Macklem speaking at 3:00 pm EDT.

The retail and restaurant sectors are also attracting attention this morning. US retail sales bounced back in a big way in May, climbing by 17.7%, which was more than double the 8.0% growth the street was expecting, recovering from a 14.7% April plunge. Meanwhile McDonalds suggested that it may be turning the corner. Although management indicated that same store sales are likely to be worse in Q2 than Q1, the 21% over year drop in May same store sales was less than the 39% drop recorded in April. Management also noted that as of June 15th 99% of its restaurants worldwide are open, up from 90% at the end of May and 75% at the end of April.

With investor sentiment catching a tailwind from encouraging developments, Dow futures are up about 620 points or 2.4%, building on yesterday’s 157-point gain. NASDAQ and S&P futures are up 1.6% to 1.8%. Overseas, the FTSE has jumped 3.2%, the Dax has popped 3.5% and the Nikkei soared 4.8%. WTI and Brent crude oil are both up about 2.5% while copper is up 1.2%.

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