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What’s Driving Stocks Higher, What Wall Street’s Saying

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Stocks rose Thursday, as liquidity remains a theme driving the market, many on Wall Street have been saying. 

All three major U.S. indices rose, with the S&P 500 up 1.15%. The 10 year treasury yield fell to 0.64% after having spiked to 0.7%. The yield remaining pressured suggests investors are only willing to keep buying stocks as long as interest rates remain low during these trying times. 

Many have pointed out of late, and continue to point out Thursday, that monetary and fiscal stimulus programs are working. More cash in the consumers’ pocket, combined with the fact that lockdowns are easing across the country, is enabling consumer spend to decline at a less alarming rate in the past month or so, pointing to a faster positive infection in economic growth. 

The S&P Consumer Discretionary ETF rose 1.34% Thursday. 

Thursday’s stocks market drivers were aplenty. 

China’s exports for the month of April rose 3% year-over-year, potentially signifying improving global economic demand, although imports in the country did shrink. 

PayPal  (PYPL) - Get PayPal Holdings Inc. Report said on its earnings report that a 17% sales increase for April is leading to a strong second quarter, more juice for bullish sentiment on the consumer. PayPal shares rose 14%. 

Gilead Sciences  (GILD) - Get Gilead Sciences Inc. Report said its remdesivir coronavirus treatment was approved in Japan. The stock rose less than 0.2%, as it’s risen roughly 20% year-to-date. 

Other cyclical sectors participated in the rally, with industrials and materials up. The Invesco Bank ETF  (KBWB) - Get Invesco KBW Bank ETF Report rose 2.24%. 

Importantly, the 10 year treasury yield has seen strange spikes in its yield, a negative for stimulus and the economy. One strategists offers a reason why. 

Here’s what Wall Street is saying. 

Tony Dwyer, Chief Market Strategist, Canaccord Genuity:

“The recent rise in the 10-year treasury yield coupled with a combination of factors could cause near-term upward pressure on the long-end on the U.S treasury curve. Huge treasury supply. The treasury announced they were bringing back the 20-year treasury bond beginning in May with na offering size of $20 billion. In addition, the treasury plans on offering $32 billion of 10 year and$22 billion of 30 year.” 

Morgan Stanley Economists: 

“Economic data reveal sharp drops in consumer spending in March and April. Three fiscal stimulus programs — which are just being unleashed — could catalyze a prolonged consumer spending boost in coming months. After contacting at a 4.8% annualized rate in Q1, we see an even larger drop off in economic activity in Q2, with real GDP contracting at a 38% percent annualized rate quarter-over-quarter. As some activity resumes, we see Q3 growth bonding 21%. Although that looks like an elevated quarter-over-quarter number, off of such a low base our forecast implies that the level of real GDP will recover back only 35% of lost output in the first half of the year."

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