S&P 500 rises as New York makes tentative plans to ease lockdown

Dow Jones
Dow Jones

The S&P 500 index rose by almost 1% as some US states started preparing for an eventual reopening. The market was also following the ongoing earnings season.

New York plans to reopen

In a statement yesterday, Governor Andrew Cuomo said that the state was planning to start reopening the economy in phases. He made the announcement as the number of daily cases started to decline in the state. The number of deaths has also started to decline.

The first phase of reopening will be for the construction and manufacturing sectors. In the second phase, the state will work with companies in a bid to design spaces that adhere to social distancing. For some industries like hotels, this will mean having less seats and more investments in cleaning. Other states like Alaska, Texas, and Tennessee have started allowing some businesses to operate.

The current reopening has a big challenge because the pace of testing is still low. This means that the chances of secondary infections are relatively high. This has happened in other countries like Spain and Italy that rushed to reopen their economies.

Among the best-performers before the market opened were hotels, department stores, and airlines.

Corporate earnings eyed

Investors are also focusing on corporate earnings and news. A while ago, General Motors became the first big company to withdraw its guidance and dividends. In a statement, the company said that the action was necessary as it tries to weather the current storm. The company had about $32 billion in cash at the end of March.

Boeing also made headlines after it announced that it was walking away from its previous deal to acquire Embraer. Other companies that received ratings downgrades today are Hertz Global and Caterpillar, which were downgraded by Barclays and Morgan Stanley respectively.

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S&P 500 index technical outlook

The S&P 500 index reached an intraday high of $2,870, which is a few points below the previous Friday’s high of $2,894. On the daily chart, this price is between the 50% Fibonacci Retracement level of $2,787 and the 61.8% retracement of $2,930. This Fibonacci was drawn by connecting the YTD high and lows of $3,400 and $2,176 respectively.

The S&P 500 is also inches above the 50-day exponential moving averages. Therefore, I expect the bullish trend to continue as bulls attempt to test the 61.8% retracement level. This trend will continue so long as the index remains above the $2,722 support. This is where the pair found some support last Tuesday and Wednesday.

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