Stock Euphoria Takes Over With Havens in Retreat: Markets Wrap

(Bloomberg) -- Global stocks extended their rally into an eighth straight day as investors clung to optimism for a quick economic recovery from the pandemic.

The Nasdaq 100 briefly surpassed its February closing record. Banks led the S&P 500 Index toward a three-month high, with four stocks gaining for every one that fell. The dollar dropped to its weakest since early March. Gold and Treasuries also slumped as investors turned away from havens after U.S. private payrolls showed fewer job losses than forecast in May.

European stocks jumped the most in two weeks, led by automakers and insurers. The euro strengthened for a seventh session as data showed the region's economic activity increased in May to the highest in three months after an easing of lockdowns.

Amid the exuberance, a popular technical momentum indicator is close to flashing a warning sign for the S&P 500 and valuations for global stocks have climbed to their highest level versus estimated earnings since the early 2000s. The rally has surprised some analysts who predict a long road back to normalcy following the pandemic. They also point to risks including tense U.S.-China relations, the possibility for a second wave of infections and the uprisings in U.S. cities against police brutality.

“The market is climbing the wall of worry right now and it is very, very uncomfortable for many investors,” said Gerald Sparrow, chief investment officer of the Sparrow Growth Fund, which has outperformed 95% of its peers this year.

But the reopening of global economies has turned into a tailwind for stocks, and a flattening virus curve and Federal Reserve stimulus are also helping gains. Wednesday's advance was driven by financial companies, auto manufacturers and makers of durable goods, while big tech shares lagged behind, indicating the rally is broadening out.

“With many businesses across the country reopening, labor watchers may optimistically be thinking that the worst is behind us,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial.

Elsewhere, shares in South Korea led Asian equities higher after the country detailed a third round of fiscal stimulus, while Singapore's benchmark entered a bull market. MSCI's gauge of emerging-market stocks climbed close a three-month high.

Here are some key events coming up:

• The European Central Bank is expected to top up its rescue program with an additional 500 billion euros of asset purchases at a meeting on Thursday. Anything less than an expansion would be a big shock, Bloomberg Economics said.
• The U.S. labor market report on Friday will probably show American unemployment soared to 19.5% in May, the highest since the 1930s.

These are the main moves in markets:

Stocks

• The S&P 500 Index rose 1.4% at the close of trading in New York.
• The Nasdaq 100 Index added 0.5%.
• The Stoxx Europe 600 Index gained 2.5%.
• The MSCI All-Country World Index climbed 1.7%.

Currencies

• The Bloomberg Dollar Spot Index slid 0.4%.
• The euro gained 0.7% to $1.1243.
• The British pound increased 0.3% to $1.2587.
• The Japanese yen slipped 0.2% to 108.93 per dollar.

Bonds

• The yield on 10-year Treasuries rose seven basis points to 0.76%.
• Germany's 10-year yield climbed six basis points to -0.36%.
• Britain's 10-year yield increased five basis points to 0.27%.
• Australia's 10-year yield rose six basis points to 0.96%.

Commodities

• WTI crude rose 0.1% to $36.84 a barrel.
• Gold weakened 1.7% to $1,698.53 an ounce.
• The Bloomberg Commodity Index rose 0.2%.

©2020 Bloomberg L.P.