Stocks Rally as Data Points to Recovery as COVID-19 Cases Rise in Most States

4:33PM ET 7/06/2020 MT Newswires
Stocks rallied on Monday as data showed signs of a recovery as the economy continues to recover from the continuing COVID-19 pandemic.

The market's three main benchmarks each added more than 1.5% as the Institute for Supply Management's monthly non-manufacturing index posted its single largest monthly gain in June and returned to positive territory for the first time in three months. The index rose to 57.1% last month from 45.4% in May, well ahead of the consensus on Econoday for 50.1%.

The "majority of these more favorable responses were skewed toward late June when COVID-19 cases were already rising across the US south in particular," said Derek Holt, head of capital markets economics at Scotiabank Economics. "July's reading could easily be stronger as reopening momentum is imperfect, occurring in fits and starts across some states, but nevertheless ongoing both at home and abroad for exporters."

Separately, IHS Markit's US services purchasing managers' index rose to 47.9 last month from 37.5 in May, ahead of the Street's view for 46.7 and still in contraction territory.

The data come as investors are watching for developments surrounding the outbreak of the respiratory disease, as infection rates in 32 states are rising, CNN reported.

According to Ian Shepherdson, chief economist at Pantheon Macroeconomics, US cases rose 26% on Sunday from the week before. However, Shepherdson said Sunday's results were "an undercount" since some states did not report figures over the weekend.

Consumer discretionary shares led market higher, surging 3.2%. McDonald's (MCD) rose 2.7%, (AMZN) added 5.8%, and Chipotle Mexican Grill (CMG) gained 6.6%.

Communications services advanced about 2.2%, pushed higher by Walt Disney's (DIS) 2% gain. Netflix (NFLX) added 3.6% and Liberty Global (LBTYK) rose 3.6%.

Financial services rose almost 2%, driven by Goldman Sachs Group's (GS) 5.1% pop, JPMorgan Chase's (JPM) 2.5% advance, and American Express's (AXP) 2.4% gain.

Apple's (AAPL) 2.7% gain helped to pull tech shares up 1.8%. Tesla (TSLA) surged 13.5% and Xilinx (XLNX) jumped 7.2%.

Uber Technologies (UBER) rose 6% as the ride-haling company agreed to acquire food-delivery firm Postmates in a $2.65 billion all-stock deal.

Crown Castle International (CCI) added 2.1% after activist investor Elliott Management recommended changes at the real estate investment trust as 5G service is rolled out by wireless providers.

The Dow Jones Industrial Average ended almost 1.8% higher while the Standard & Poor's 500 added about 1.6%. The Nasdaq Composite rose 2.2%.