Stocks rise after Fed expands stimulus

Stocks erased earlier losses and rose Monday, after the Federal Reserve said it would begin purchasing individual corporate bonds as part of its emergency lending program to inject liquidity into the virus-stricken economy.

[Click here to read what’s moving markets heading into Tuesday, June 16]

Earlier in the session, the Dow was off as many as 762 points, or 3%, as investor jitters over rising coronavirus cases in key parts of the country stirred up an extension of last week’s pullback in equities.

Last week, stocks posted their first weekly loss in a month, with a steep selloff on Thursday comprising much of the weekly decline. The plunge, which came on the heels of a more than 40% run-up in the S&P 500 since March, came after new data showed rising coronavirus case and hospitalization counts in states that were among the first to reopen businesses, and after the Federal

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Cyclical Stocks Have Led Market Recoveries

Key insights

  • If economically sensitive stocks lead the market recovery, as we expect, history would repeat itself.
  • Many cyclical companies, such as global industrial conglomerates, capital-rich banking institutions, and travel & leisure companies, should experience a substantial rerating.
  • With over 50% of the ACWI index invested in the lowest Covid-19 beta sectors, passive index investors appear to be underexposed to upside recovery.

“People should value manufacturing–the world of atoms vs. the world of bits–far more. It is looked down upon by many, which is just not right.” -Elon Musk

Although less controversial than some of Mr. Musk’s recent tweets, markets appear to disagree with his tribute to the physical over the digital. This year-to-date’s sector winner in the MSCI ACWI Index (“ACWI”) is information technology, with software & services devouring the world of atoms. In the volatile first five months of 2020, these companies trafficking in bits rose nearly 10%,

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Why Small-Cap ETFs & Stocks Outperformed Last Week

U.S. stocks performed well last week on optimism over a potential coronavirus vaccine and the reopening of the economy, though rising tensions between the United States and China weighed on the market. All the 50 states have lifted restrictions put in place to combat the coronavirus outbreak. The easing has started to propel demand and is likely to revive economic growth (read: Is Moderna Winning the COVID-19 Vaccine Race? ETFs to Gain).

The latest data for U.S. consumer sentiment shows that the University of Michigan’s consumer sentiment index rose to 73.7 in early May from 71.8 in April as fiscal stimulus measures “improved consumers’ finances and widespread price discounting boosted their buying attitudes.”

Additionally, Federal Reserve Chairman Jerome Powell said the central bank still has plenty of ammunition to rescue the economy from a deep slowdown, indicating a potential recovery in the second half of the year. The Fed would

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