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Stocks Extend Rally as Jobless Claims Fall

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05/28/2020 | 12:43pm EDT

By Alexander Osipovich, Joe Wallace and Frances Yoon

U.S. stocks rose Thursday, extending their recent rally, after data showed a drop in the number of Americans filing for unemployment -- albeit from historically high levels.

The Dow Jones Industrial Average climbed 142 points, or 0.6%, in midday trading, a day after the blue-chips gauge closed above 25000 for the first time since early March and posted its largest two-day advance in more than a month.

The S&P 500 rose 0.7%, while the Nasdaq Composite gained 0.8%.

U.S. workers filed just over 2.1 million jobless claims last week, extending a downward trend, but still at sharply elevated levels from before the pandemic.

States and cities have been moving ahead with plans to let businesses reopen, fueling optimism that the economy has turned a corner. New data showed U.S. gross domestic product fell at a 5% rate in the first quarter, slightly steeper than initially estimated and the largest quarterly rate of decline since the last recession.

"There is some optimism that the U.S. economy is moving forward," said Jeffrey Schulze, an investment strategist at ClearBridge Investments. "It's also important that there are no signs of a second wave of infections."

Investors shrugged off concerns that fresh tensions between the U.S. and China could lead to a renewed trade war. China forged ahead on Thursday with a resolution to impose national-security laws on Hong Kong in a bid to crush anti-Beijing protests.

That came a day after the House of Representatives passed a bill to sanction Chinese officials involved in the suppression of Muslim minority groups, and the State Department determined that Hong Kong no longer has a high degree of autonomy from China--a move that could open the way for President Trump to revoke special arrangements on trade.

"It's just another potential concern on top of Covid," said Brian O'Reilly, head of market strategy at Italian asset manager Mediolanum. "Whether we actually get into trade war 2.0 -- I think even in a second term for Trump, they'd be reticent to go down that path."

Hong Kong's Hang Seng Index fell 0.7%, even as most other Asian and European indexes posted gains.

In the U.S., nine of the S&P 500's 11 sectors were higher, with utilities, health-care and consumer staples the best performers. Only energy and financial stocks declined.

Dollar Tree shares jumped 11% after the discount retailer posted stronger-than-expected earnings for the first quarter, boosted by a surge in demand for essential goods as homebound consumers stocked up during the pandemic.

Shares of Boeing rose 3.2% after the aerospace giant laid out plans to cut more than 13,000 jobs. HP shares fell 12% after the information-technology company's first-quarter profit fell and it pulled financial projections for the year.

A key question for investors is whether economically sensitive stocks can extend their recent rally, said Hugh Gimber, a strategist at J.P. Morgan Asset Management. "It's been the most beaten-up sectors that have really caught the bounce," he said, pointing to gains for shares in U.S. banks and travel companies.

The rally in shares of technology companies has paused in recent days, having powered much of the recovery in U.S. stocks since March. They could come under further pressure in response to a draft executive order that Mr. Trump is expected to sign Thursday, Mr. Gimber said. The order would seek to limit the broad legal protection that federal law currently provides social-media and other online platforms, according to people familiar with the draft.

Twitter shares dropped 2.7%. Mr. Trump lashed out at the company this week after it added fact-checking notices to two of his tweets.

Stocks are likely to pull back at some point given the degree of uncertainty surrounding the global economy as lockdown measures are relaxed, said Michael Drummey, head of U.S. equity risk trading at Mizuho Americas LLC. "The market is acting in a way that doesn't really line up with that uncertainty," he said. "We have a FOMO rally -- a fear of missing out."

Overseas, the Stoxx Europe 600 rose 1.7% on Thursday. Japan's Nikkei 225 jumped 2.3%.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com, Joe Wallace at Joe.Wallace@wsj.com and Frances Yoon at frances.yoon@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
BEST INC. -6.67% 4.48 Delayed Quote.-19.42%
DJ INDUSTRIAL 1.44% 26075.3 Delayed Quote.-9.92%
DRAFT INC. 1.52% 1071 End-of-day quote.0.00%
EURO / US DOLLAR (EUR/USD) 0.02% 1.1299 Delayed Quote.0.67%
HANG SENG -2.09% 25701.81 Real-time Quote.-8.83%
NASDAQ 100 0.76% 10836.333146 Delayed Quote.24.08%
NASDAQ COMP. 0.66% 10617.443394 Delayed Quote.18.33%
NIKKEI 225 -1.06% 22290.81 Real-time Quote.-5.77%
S&P 500 1.05% 3185.04 Delayed Quote.-1.42%
SEEK LIMITED -0.70% 21.42 End-of-day quote.-5.01%
THE GLOBAL LTD. -3.30% 205 End-of-day quote.-56.48%
THE LEAD CO., INC. -1.71% 345 End-of-day quote.-11.54%
THE NEW HOME COMPANY INC. 2.16% 3.31 Delayed Quote.-28.97%
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