- Dow Jones Industrial Average (DJIA) futures point to cautious gains on Thursday.
- The MSCI World Index of global stocks is on track for its best month in history.
- Investors continue to shrug off poor economic data as hopes turn to breakthrough coronavirus treatments.
Not many would have predicted this outcome a month ago. Global stocks are on track to hit their best month in history if the market closes in the green today. Dow Jones Industrial Average (DJIA) futures led the charge, up 80 points on Thursday.
The MSCI World Index, which tracks 1,643 stocks around the world, is up 13.3% for April. It’s the strongest showing since the index was created in 1986.
The U.S. stock market is also on pace for a blistering month. The S&P 500 will clock in the best monthly performance since 1974, barring any fireworks in today’s session.
Dow futures point to modest gains
Dow Jones futures contracts soared after the market closed last night. Solid earnings at Microsoft, Facebook, and Tesla helped ease concerns of a broad, tech-led selloff. The rally faded overnight, but DJIA futures remain up 81 points (0.35%)
Global stocks best month ever
The last two months have been surreal, to say the least. The financial markets saw the fastest correction in history as the coronavirus pandemic unleashed panic and fear into the market. But a trigger-happy Federal Reserve and hopes of a turnaround quickly pushed the markets back to 2019 levels.
The effect has been truly global with supply chains disrupted across Asia, Europe, and America. The MSCI World Index captured the sentiment perfectly, tracking 1,644 stocks across 23 countries.
It’s worth pointing out, however, that the index heavily favours US companies. 64% of the index’s weighting is attributed to the United States. And its five largest constituents are Microsoft, Apple, Amazon, Facebook, and Alphabet.
As CCN Markets reported, these five companies have an outsized effect on the stock market right now.
Stock market positives
Despite a bleak economic backdrop, traders are latching onto positive headlines. The Dow continues to push higher on news that Gilead Sciences Inc’s drug Remdesivir is being fast-tracked into hospitals.
The drug showed a 31% faster recovery for Covid-19 patients compared to those that received a placebo. Dr. Anthony Fauci called the breakthrough “highly significant.” The Food and Drug Administration (FDA) is expected to make it available as soon as possible.
Traders also got a boost from the Federal Reserve. Chairman Powell pledged continuing support for the economy in yesterday’s statement.
“[The Fed is] committed to using its full range of tools to support the U.S. economy in this challenging time.”
Remdesivir is not a “game changer”
While the stock market feasts on hopes for the new Gilead drug, doctors have urged caution. Carlos del Rio, Executive Associate Dean for Emory at Grady, said it’s not a game-changer.
At most a “solid hit” but certainly not a “home run”. Not a “game changer” I am afraid
Others in the scientific community were concerned the data hadn’t been properly looked at by researchers. Instead the results were whisked straight to the White House for a photo opportunity. Dr. Eric Topol of the Scripps Research Translational Institute remains cautious about the data.
It was expected to be a whopping effect. It clearly does not have that.
Dow Jones could still plough new lows
Despite the optimism on Wall Street, the stock market isn’t out of the woods yet. Market researcher James Bianco believes new lows still lie in wait.
At a minimum, I do think we will still revisit the 2200 S&P 500 low, if not make a lower low.
Bianco said the retracement could come in late summer or early fall. He said the relief rally looks too similar to historic bear market rallies, which later plunged new lows.
The market will face another test today as jobless claims data hits the wire at 8.30 am. We’re expecting somewhere in the region of 3.5 – 4 million new claims, for a total of 30 million since the crisis began.
This article was edited by Samburaj Das.
Last modified: April 30, 2020 11:31 AM UTC