Wall Street closes month of gains on hopes of economy reopening

United States stocks finished mostly higher on Friday after US President Donald Trump announced measures against China in response to new security legislation that was less threatening to the US economy than investors had feared.

The Dow ended the day’s session slightly lower, but all three indexes registered gains for the month and the week with the S&P 500 having its best May since 2009. 

The Dow Jones Industrial Average fell 17.53 points, or 0.07 percent, to close at 25,383.11. The S&P 500, a proxy for the performance of US retirement and college savings accounts, gained 14.58 points, or 0.48 percent, to close the week at 3,044.31. The Nasdaq Composite Index was also up 120.88 points, or 1.29 percent, to settle at 9,489.87.

The S&P 500 initially extended losses on Friday after Trump said he was directing his administration to begin the process of eliminating special treatment for Hong Kong in response to China’s plans to impose new security legislation on the semi-autonomous territory.

But Trump made no mention of any action that could undermine the phase one trade deal that Washington and Beijing struck early this year – a concern that had cast a cloud over the market throughout the week.

“He began speaking in a very tough tone,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

“The market was worried he was going to announce something substantial, something detrimental to the US economy,” Zaccarelli said. “Then, as he spoke, it became clear the actions being taken were not going to be as dramatic as originally feared.”

Trump also said the US is terminating its relationship with the World Health Organization, something he had threatened to do earlier this month.

Big May

For the month, the Dow added 3.9 percent, the S&P 500 gained 4.5 percent, and the Nasdaq rose 6.8 percent. 

Massive amounts of government stimulus helped lift global stocks in May, offsetting reams of grim economic data. Investors have been buying stocks as lockdowns have been lifted or eased, betting on a speedy recovery.

The S&P 500 gained around four percent for the month, making it the best May for the index since 2009. S&P 500 technology shares gave the index its biggest boost.

Expectations of a quick economic recovery from the coronavirus pandemic have driven the S&P 500 up more than 30 percent from its March lows.

In energy, US crude oil prices jumped more than five percent, while the global benchmark Brent edged higher. West Texas Intermediate (WTI) crude futures rose $1.78 to settle at $35.49 a barrel, while Brent settled up 4 cents at $35.33 a barrel.

Both contracts had their biggest monthly gains in years, supported by production cuts and optimism about demand recovery led by China. 

The latest confrontation between the US and China has fuelled concerns that worsening tensions between the  world’s largest two economies could derail the recent sharp market gains.

The markets were further boosted by the promise of the reopening of  New York City’s economy. New York Governor Andrew Cuomo said Friday that the Big Apple is “on track” to enter phase one of reopening on June 8, and he said five upstate regions will now transition to phase two.

Meanwhile, US Federal Reserve Chair Jerome Powell, speaking in a webcast organised by Princeton University on Friday, reiterated the US central bank’s promise to use its tools to shore up the economy amid the coronavirus pandemic.