Stocks soared Monday after Federal Reserve Chairman Jerome Powell said the economy is likely to see a fast recovery.
All three major U.S. indices rose with the S&P 500 up as much as 2.9%. The 10 year treasury yield rose to 0.68%. Yields rise as prices fall.
Powell told CBS’ 60 Minutes that an economic recovery from the coronavirus-induced recession won’t take long, a drastic change of tone from recent remarks made last week. He even said there will be positive GDP growth in the third quarter.
Strategists point that that stocks have priced in an inflection point in August, at which point growth is expected to trend towards a positive rate. The market usually prices in a recovery from recession about 4 months in advance, so August will be a pivotal month. The stock market began rising again in late March.
The biggest risk to this remains the state of the virus. Stocks fell last week on those fears, specifically. “Reopening states continue to have a flat or upward trajectory in new cases,” wrote Matthew Harrison, head of biotechnology research at Morgan Stanley.
But another more marginal risk, which cropped up this weekend, is the continued U.S.-China political spat, which included a militaristic threat on the U.S. part last week. Most recently, China put Apple (AAPL) - Get Report and Boeing (BA) - Get Report on its unreliable entities list, saying it may place restrictions on these companies, including sales restrictions of Boeing products into China. But as Apple opens stores and economic confidence takes hold, these stock cut through those potential headwinds, with Apple and Boeing rising 1.7% and 4.5%, respectively.
Also, the U.S. may restrict its own semiconductor makers from selling to China’s key teach giant, Huawei. But the iShares PHLX Semiconductor ETF (SOXX) - Get Report rose 3%, as it can often be more volatile that the broader market is.