Stocks soar as investors look past civil unrest to economic high notes

Stocks swelled Wednesday as investors continued to home in on positive economic signals and largely dismissed the social unrest that has roiled cities across the country for more than a week.

Wall Street focused on recovery as economies around the world continued to ease restrictions meant to blunt the spread of the coronavirus. New data showed that private payrolls shrank far less than expected in May while hopes grew for more government stimulus in Europe. But storm clouds remain amid a recent flare-up in U.S.-China tensions and widespread protests in the United States over the death of George Floyd, a black man who died in police custody in Minneapolis.

“The U.S. riots, disturbing as they are, are also being discounted in the greater economic picture,” Jeffrey Halley, an analyst with OANDA, wrote in commentary Tuesday. “Rightly so, without sounding insensitive, as they are unlikely to derail the expected U.S. rebound. Whether the lack of social distancing by protesters, police and soldiers comes back to bite them, is a story for another day.”

Shortly before noon, the Dow was up nearly 450 points, or 1.7%, at 26,189. The Standard & Poor’s 500 index had jumped 1.2% to 3,117, putting it within 10% of its February high. The tech-heavy Nasdaq climbed 0.7% to 9,670.

Overseas investors were equally enthusiastic, with European markets spiking 2% or more across the board and Asian markets all closing in positive territory. Continued declines in COVID-19 cases in some of the hardest-hit countries, amid gradual steps toward normalcy, have raised confidence that an economic revival is underway.

Wall Street also absorbed better-than-expected economic data. Private payrolls shed 2.76 million jobs in May, ADP reported Wednesday. Economists surveyed by Dow Jones had expected a drop of 8.75 million. It’s unclear why there’s such a large gap. Large businesses, which employ 500 people or more, bore the brunt of those losses at 1.6 million. Manufacturing and trade sectors were especially hard hit.

Mike Loewengart, managing director of investment strategy at E-Trade, said that even while the May figures defied expectations, “there still remain a lot of question marks.”

“The world of work has structurally changed and it’s unclear if recent job losses are permanent or if there is hope of them returning,” he said. “Further, as the hunt for a vaccine continues, this could have downstream effects on the economy and job market should a second wave of infections arise.”

Manufacturing showed signs of stabilizing after four months of contraction, according to the Institute for Supply Management’s May report. Timothy Fiore, the ISM’s chair of the business survey committee, wrote that May was a “transition month” and a signal the country was getting back to work. Demand, however, “remains uncertain.”

The U.S. unemployment rate stood at 14.7% in April, the worst since the Great Depression, and is expected to push toward 20% when the Labor Department releases May data on Friday.

“The green shoots showing a strengthening of demand in the economy this spring do not include the jobs market,” Chris Rupkey, chief financial economist at MUFG Union Bank wrote in commentary Wednesday. “There is inequality in the economy and the labor market is no exception especially in this recession where lower paid work at the shops and malls, hotels, and bars and restaurants has simply evaporated.”

Oil markets retreated after Bloomberg reported that an upcoming OPEC meeting might be stalled over a production cuts dispute. Brent crude, the international benchmark, fell nearly 1% to $39.20 a barrel.