Stocks finished slightly higher on Tuesday as oil prices jumped for a fifth day and Wall Street continued to bet on a successful reopening of the economy, but the market cut its gains after Federal Reserve Vice Chairman Richard Clarida warned that the economy would need more support to rebound.
The Dow Jones Industrial Average was up 0.6%, over 100 points higher, on Tuesday, while the S&P 500 rose 0.9% and the Nasdaq Composite gained 1.1%.
Stocks rose as investors became more optimistic about several states—including Georgia and Florida—beginning to reopen businesses and lift coronavirus lockdowns.
California Gov. Gavin Newsom said on Monday, for instance, that some of the state’s retail businesses would be allowed to reopen on Friday if they offer curbside pickup.
Starbucks CEO Kevin Johnson said that the company plans to reopen 85% of its stores in the U.S. by the end of the week, which sent its stock over 2% higher.
Shares of Norwegian Cruise Line, on the other hand, plunged more than 20% after the company warned of a potential bankruptcy, saying that there’s “substantial doubt” about its ability to keep operating amid coronavirus.
While stocks were up by around 1.5% for most of the day, they abruptly cut gains during the final hour of trading after Federal Reserve Vice Chairman Richard Clarida told CNBC that the U.S. economy needs more support before it can rebound.
“More policy support will be needed from the Fed and possibly also fiscal policy,” Clarida said. “It just depends on how this evolves.”
Oil prices surged nearly 20%, posting its fifth straight day of gains for the first time since July, thanks to optimism around ongoing production cuts and a recovery in demand, which had been hard-hit by coronavirus shutdowns.
Tuesday’s rally followed modest gains on Monday. The market originally moved lower to start the week, but big tech stocks—including Microsoft, Apple, Amazon and Netflix—all rallied to drag the broader market back into positive territory.
Airline stocks suffered a big sell-off on Monday, with Delta, United and American Airlines all dropping more than 5%. That came after comments from legendary investor Warren Buffett on Saturday, who said Berkshire Hathaway had sold all of its airline holdings—worth a combined $4 billion—as a result of the coronavirus crisis: “The world has changed for airlines,” he admitted. Despite his “mistake,” Buffett expressed optimism that the U.S. economy could overcome coronavirus, telling investors, “never bet against America.”
WHAT TO WATCH FOR
Ongoing tensions between the United States and China have flared up again, with members of the Trump administration pushing a theory that the coronavirus originated in a Wuhan lab. U.S. Secretary of State Mike Pompeo suggested on Sunday that there is a “significant amount of evidence” to support the controversial theory.
President Trump threatened to implement new tariffs on China last week, with his administration reportedly in the early stages of crafting retaliatory measures over the outbreak.