with Brent D. Griffiths

American city streets are boarding up as protesters fill in. But Wall Street keeps breaking out.

The stock market rally continues defying the gravity of the chaos unfolding all around it: As civil unrest grips the country, the economy reels from a once-in-a-century shock, and the coronavirus pandemic still claims upward of more than 1,000 American lives a day, the S&P 500 just staged its strongest-ever 50-day performance:

Just on Wednesday, that broad index gained 1.4 percent to close at 3,122.87; the blue-chip Dow Jones industrial average surged 2 percent to finish at 26,269.89; and the tech-heavy Nasdaq gained 0.8 percent to close at 9,682.9, just 2 percent shy of an all-time high.

Some professional market watchers acknowledge they are stumped by the disconnect.

The nation is piling crisis on top of crisis. Yet investors remain indefatigably bullish on stocks. “Normally I’m right there alongside whoever suggested tequila shots at midnight, but today, I’m going to quietly grab my jacket and leave before anyone notices I’m gone,” Academy Securities head of macro strategy Peter Tchir wrote in a note, according to Bloomberg News’s Sarah Ponczek and Vildana Hajric. “Today has that feeling in the market.” 

David Donabedian, chief investment officer of CIBC Private Wealth Management, offered one explanation to the Wall Street Journal’s Karen Langley and Caitlin Ostroff: “Investors are continuing to ignore the three P’s — pandemic, protests and politics — and are instead focused on what increasingly is being interpreted as a quicker and better than expected recovery in the economy and the idea that may portend a quicker recovery for earnings as well.”

It’s true that political tumult historically hasn’t dragged down the market.

Consider how the S&P 500 landed in the green in the weeks immediately following the Pearl Harbor bombing; the assassination of President John F. Kennedy; the Sept. 11, 2001, terrorist attacks; and Brexit, as this table from Strategas Research Partners demonstrates:

Or look at how that index rallied through the tumult of 1964, as this chart from Bespoke Investment Group macro strategist George Pearkes shows:

But even a soda-straw view of the economy presents plenty to worry about.

Economic activity this quarter has been cut by more than half, according to an updated estimate by the Atlanta Federal Reserve’s GDPNow tracker that incorporated grim manufacturing data. The macroeconomic forecasters at IHS Markit see the economy shrinking 8.8 percent this year. They project a “grudging recovery,” with employment not regaining its pre-pandemic level until 2024.

There was a happy surprise Wednesday from ADP Research’s forecast of private-sector employment, which showed a 2.76 million job drop in May, less than a third of the expected 9 million jobs lost. But economists still estimate the official Labor Department report coming Friday will find the economy shed 8 million jobs last month

And "the pandemic isn’t finished with the U.S. labor market, threatening a second wave of job cuts — this time among white-collar workers,” Bloomberg News reports. “Close to 6 million jobs are potentially on the line... That includes higher-paid supervisors in sectors where frontline workers were hit first, such as restaurants and hotels. It also includes the knock on-effects to connected industries such as professional services, finance and real estate.”

Corporate earnings for S&P 500 companies are on track to fall 14.6 percent in the first quarter, the largest decline since the financial crisis in 2009, according to FactSet. And while the federal emergency response to the economic shutdowns has been swift and huge, there are signs the programs launched so far has missed their marks, as they verge on running dry for millions of vulnerable Americans.

Other major threats loom.

Beyond the ongoing and unprecedented challenge facing policymakers of reviving the economy from its induced coma, the outlook this summer and beyond remains fraught with pitfalls. For one, the pandemic itself is not yet under control, and the often-packed crowds of thousands of people pouring into city streets across the country for days and nights on end present ripe opportunities for fresh outbreaks of the virus.

Separately, U.S.-China tensions — which weighed on the stock market until President Trump reached a trade accord with Beijing in January — are heating up again (more on that below).

Yet the S&P 500 is back to where it stood in early December.

And the Nasdaq is up more than 6 percent so far this year. We noted some of the sources of investor optimism here last week, including hopes the economic recovery will be sharper than expectations; the Fed’s massive interventions backstopping financial markets; and the outperformance of the tech sector hoisting the broader market up with it.

Todd Sohn, technical strategist with Strategas, pointed to the Fed’s help as a factor investors “should not want to fight or ignore.” In an email, he also cited the tech names as “stocks that were not necessarily in the eye of the storm” of the pandemic or its fallout and did much of the “heavy lifting” during March and April.

If there’s a historical lesson to be drawn, Sohn pointed to the market’s emergence from the global financial crisis. “We could be having the same conversation in June of 2009,” he writes, noting the “huge rally of the March 2009 lows amidst a great unknown of how to fix the economy. Perhaps the point being the market is very forward looking.”

President Trump, for his part, tweets that he sees a recovery taking shape already: 

But the rally could stumble if the sharp economic rebound some investors are counting on fails to materialize. As Adviser Investments chairman Daniel Wiener tells Thomas Heath and Taylor Telford, “Unrealistic expectations for a V-shaped economic and earnings recovery is driving stocks higher.”

Protests fallout

Snap to stop promoting Trump’s account.

It is the latest social media company to react to the president’s “shooting starts” posts: “The president’s account, realdonaldtrump, will still be live on the app, and people can still search and subscribe to it. But it won’t show up in the tab that suggests stories to watch or people to follow,” Rachel Lerman reports.

“Snapchat, a social media app to share disappearing photos, videos and time-limited ‘stories,’ is especially popular with millennials and other younger users. It has 229 million daily active users, it said in its first-quarter financial results, even bigger than Twitter’s 166 million daily active users.”

  • Facebook’s new oversight board isn’t operational yet, won’t review Trump’s posts: “‘How Facebook treats posts from public figures that may violate their community standards are within the scope of the Board, and are the type of highly challenging cases that the Board expects to consider when we begin operating in the coming months,’ the board said in the blog post,” CNBC’s Salvador Rodriguez reports.

Amazon reopens warehouses closed to prevent looting: “On Tuesday, Amazon temporarily shuttered two delivery stations in Chicago, Illinois, and Gary, Indiana, as protests erupted nationwide ….,” CNBC's Annie Palmer reports. “The facilities will reopen Wednesday in time for the night shift to begin at 8 p.m. CT.” (Amazon CEO Jeff Bezos owns The Washington Post.)

Ben & Jerry's pointed statement stands out: “Corporate America’s response to the protests over racial injustice and the killing of George Floyd has been about what you would expect: lots of black squares on Instagram, statements by CEOs decrying racism, some silence. Nike posted a video with a twist on its slogan: ‘For once, don’t do it,’ the company urged, the ‘it’ being choosing complacency or not 'being part of the change,'” Emily Heil reports.

“Standing out in this vanilla-bland crowd is ice cream company Ben & Jerry’s, which posted a lengthy and pointed message on its website… The message expressed support for concrete policy steps, including the passage of Democratic-sponsored legislation creating a commission to study the effects of slavery and discrimination and to consider reparation proposals; and the establishment of a task force supported by Floyd’s family’s to draft ‘bipartisan legislation aimed at ending racial violence and increasing police accountability.’"

Coronavirus fallout

Senate passes bill to increase PPP flexibility. 

The legislation now heads to Trump's desk: “The Senate passed legislation to provide more flexibility to small businesses that have received forgivable loans under the Paycheck Protection Program, giving them more time to use the money just ahead of a deadline to forgive the first round of payments,” Erica Werner reports.

“The central aim of the legislation is to allow businesses 24 weeks — instead of eight — to spend money they receive under the Paycheck Protection Program and have the loans forgiven. The restaurant industry and other business groups had pushed for the change, saying that eight weeks was not enough time, given that the pandemic has forced businesses to stay shut longer than anticipated when the Paycheck Protection Program was created in late March as part of the $2 trillion Cares Act. Lawmakers of both parties supported the change.”

  • Stimulus funds are largely depleted after nine weeks: “Of the total $1.6 trillion in aid, roughly $1.12 trillion, or about 70 percent, has been distributed, according to a Wall Street Journal analysis of government data and estimates by the Committee for a Responsible Federal Budget, a bipartisan nonprofit group,” WSJ’s Kate Davidson and Paul Kiernan report. “Direct cash assistance is just one form of coronavirus-related spending; but some economists say it has the biggest impact because it is intended to fill the void in economic activity created by social-distancing measures.”
  • The Fed is expanding eligibility for its municipal lending program. “The central bank said Wednesday it would allow all 50 states to designate two cities or counties to sell debts directly to the central bank’s program, creating an option for states with less populous municipalities to participate,” WSJ's Heather Gillers and Nick Timiraos report. "The central bank also said state governors will be able to designate an additional two issuers whose revenues are derived from operating activities, such as airports, toll facilities, utilities or public transit, to be eligible to use the facility on their own.”
Businesses struggle to pay rent, setting off a dangerous chain reaction.

The problems could last months: Nearly half of commercial retail rents were not paid in May. Companies as big as Starbucks say the financial devastation from the shutdown has left them unable to pay their full property bills on time. Some companies warn they will not be able to pay rent for months,” Heather Long reports

“Landlords are now at risk of bankruptcy, too. Commercial real estate prices are falling. Jobs at property management companies and landscapers face cuts. Banks and private investors are unwilling to lend to most commercial real estate projects anymore, and cash-strapped city and local governments are realizing the property taxes they usually rely on from business properties are unlikely to be paid this summer and fall.” 

  • Payday lenders target consumers hurt by the virus: “They sidestepped state crackdowns by joining with out-of-state banks to offer loans and now are bypassing ad bans put in place by Google, which calls their offerings ‘dangerous financial products,’ and Facebook Inc.,” WSJ's Coulter Jones, Jean Eaglesham and AnnaMaria Andriotis report.
  • Unemployment benefits aren't covering basic household expenses for nearly a third of recipients. And another 9 percent have yet to receive their first payment, according to an analysis by Morning Consult economist John Leer. 
  • American Eagle says it is seeing pent-up demand as it reopens: “Management explained that as stores reopen … sales are averaging an impressive metric of roughly 95 percent of their normal levels. American Eagle said it has opened 556 locations to date. It has nearly 1,100 in total,” CNBC's Lauren Thomas reports.
  • FedEx adds delivery fees for some companies: “The fees are designed to hit some of the largest shippers whose volume has exploded as consumers have hunkered down and ordered everything from cleaning supplies to computer monitors during a broad nationwide lockdown,” WSJ's Paul Ziobro reports.
  • Wall Street firm will pay junior bankers to delay start dates: “Evercore Partners Inc. is offering to pay incoming junior bankers up to $25,000 to delay starting their jobs … a move that hasn’t been seen on Wall Street since the last financial crisis,” WSJ's Liz Hoffman reports.
Around the world:
  • European Central Bank set to scale up stimulus: “The bank is expected to increase its coronavirus crisis asset-purchase program at this week’s meeting, amid fears of falling inflation and the steepest economic contraction since World War II for the euro zone,” CNBC's Annette Weisbach reports.
  • UBS sees Asia as “only region” with positive earnings growth this year: “We are overweight Asian ex-Japan equities at this point,” UBS Global Wealth Management’s Chief Investment Office Adrian Zuercher told CNBC’s “Street Signs”. “I think for us, that’s the only region that will have positive earnings growth this year and also next year, double digit earnings growth.”

When superpowers collide

Trump administration to bar Chinese carriers from flying to U.S.

The ban would begin June 16, though it could begin earlier: “The move, announced by the U.S. Department of Transportation, penalizes China for failing to comply with an existing agreement on flights between the two countries. U.S.-Chinese relations have soured in recent months amid tensions surrounding the pandemic and Beijing’s move to impose new national security legislation for Hong Kong,” Reuters's David Shepardson reports.

“Chinese carriers are currently flying four round-trip flights to the United States weekly. Delta Air Lines and United Airlines have asked to resume flights to China this month, even as Chinese carriers have continued U.S. flights during the pandemic.”

  • China responded by allowing more foreign flights: China's aviation authority "said Thursday that it would allow foreign airlines to increase flights between the country and other regions from June 8. The online statement came about 12 hours after [Trump’s order],” CNBC's Evelyn Cheng reports. The statement does not directly refer to the U.S. actions, but “the new Chinese policy would allow all foreign airlines to choose from a list of approved cities to operate one international passenger flight a week.”

New restrictions on 33 Chinese firms take effect Friday: The Commerce Department “added the companies and institutions to an economic blacklist, accusing them of helping China spy on its minority Muslim Uighur population in Xinjiang or because of alleged ties to weapons of mass destruction and China’s military,” Shepardson and Karen Freifeld of Reuters report.

“China’s foreign ministry said last month it deplored and firmly opposed U.S. sanctions over Xinjiang, calling it a purely internal affair for China. The move will restrict the sales of U.S. goods to the companies and institutions on the list, as well as certain items made abroad with U.S. content or technology. Companies can apply for licenses to make the sales, but they must overcome a presumption of denial.” 

Pocket change

Pilgrim’s Pride CEO indicted on charges of price-fixing.

The charges are the first action in an ongoing criminal antitrust probe: “The one-count indictment, returned by a federal grand jury in Colorado, alleges current and former senior executives at Pilgrim’s Pride Corp. and Claxton Poultry Farms fixed prices and rigged bids from 2012 to 2017,” WSJ’s Brent Kendall and Jacob Bunge report.

“Colorado-based Pilgrim’s is the nation’s second largest producer. Company Chief Executive Jayson Penn was charged, as was a former Pilgrim’s vice president, Roger Austin. The president of Georgia-based Claxton, Mikell Fries, and a vice president, Scott Brady, were both indicted. … Collusion accusations have shadowed the $65 billion U.S. chicken industry since late 2016, when restaurant companies and other poultry buyers sued major poultry producers, accusing them of illegally coordinating operations to inflate prices. The chicken companies, including Tyson Foods Inc., Pilgrim’s Pride, Sanderson Farms Inc. and Perdue Farms Inc., have denied those allegations.”

Ex-Enron CEO Jeffrey Skilling launches new venture: Skilling, released last year after a 14-year prison term stemming from the energy firm’s collapse, is raising funds to launch a digital marketplace catering to professional oil and gas investors,” Reuters's Liz Hampton reports.

“The venture, called Veld LLC, plans to profit by charging a fee for marketing stakes in operating oil and gas wells, one of the people said, and will offer analytical data to investors interested in the well stakes.”

Apple must face shareholder lawsuit over Cook’s iPhone and China comments: A federal judge said Apple Inc must face part of a lawsuit claiming it fraudulently concealed falling demand for iPhones, especially in China, leading to tens of billions of dollars in shareholder losses,” Jonathan Stempel reports.

“While dismissing most claims, U.S. District Judge Yvonne Gonzalez Rogers ruled late Tuesday that shareholders can sue over Chief Executive Tim Cook’s comments touting strong iPhone demand on a Nov. 1, 2018 analyst call, only a few days before Apple told its largest manufacturers to curb production.”

Ex-UAW president pleads guilty to racketeering and embezzlement: Former United Auto Workers President Gary Jones “is the highest-ranking member of the UAW to be convicted as part of the ongoing probe into the misuse of millions of dollars, embezzlement and bribery by union officials. He is the 14th person to plead guilty as part of the case, including 11 officials affiliated with the union and three executives with Fiat Chrysler,” CNBC’s Michael Wayland reports.

“The conviction is part of a plea deal with federal prosecutors. Jones also has agreed to cooperate with prosecutors as part of the government’s ongoing investigation, Assistant U.S. Attorney David Gardey said Wednesday during Jones’ plea hearing.” 

Campaign 2020

Biden embraces his inner FDR during upheaval.

Rhetorically, he has begun to reframe what his presidency would mean: “The turmoil across the country, punctuated this week with authorities’ use of force against peaceful protesters near the White House, has caused a rethinking for a candidate who once promised donors that under his administration ‘nothing would fundamentally change’ and who, just 11 weeks ago during his final primary debate, offered himself as a pragmatist, unlike his socialist rival Bernie Sanders, declaring: ‘People are looking for results, not a revolution,’” Matt Viser reports.

“Now, in virtual town hall meetings, media interviews, his own podcast and in a rare formal address Tuesday, Biden has pointed toward a transformational era in which government would play a bigger role in curing the country’s public health, economic and racial woes.”

Chart topper



  • The Labor Department announces weekly jobless claims
  • DocuSign, Gap, Michaels, Toro and Vail Resorts are among the notable companies reporting their earnings.
  • The Banking Committee holds a hearing on the “crisis in Hong Kong.”


The funnies

From the Atlanta Journal-Constitution's Mike Luckovich: 

Bull session