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Bank stocks help push Wall Street higher

2020-06-26 HKT 04:47
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  • Optimism about banks overcame concern about coronavirus on Wall Street overnight. File image: Shutterstock
    Optimism about banks overcame concern about coronavirus on Wall Street overnight. File image: Shutterstock
Wall Street's main indexes closed higher in choppy trading on Thursday, with bank stocks soaring ahead of annual stress test results and helping to offset investor jitters over alarming increases in new coronavirus cases.

The recently battered S&P 500 banks sub-index led the gainers for the session after US banking regulators eased rules and investors waited for results of the sector's annual stress test, which helps determine dividend policies.

The bank index had fallen 19 percent from its recent high on June 5 to Wednesday's lowest point. It closed up 3.6 percent on Thursday.

But investors remained nervous throughout the day as the number of new virus cases in US states grew, especially in the West and South.

Texas Governor Greg Abbott said he was halting his state's phased economic reopening in response to a jump in Covid-19 infections and hospital admissions.

And stocks wobbled temporarily late in the session after Apple said it would close 14 stores in Florida again due to rising Covid-19 cases after other re-closures in Houston, Arizona, South Carolina, and North Carolina.

A flare-up in virus cases in recent days has taken some wind out of a Wall Street rally powered by hopes of a quick economic recovery and massive government stimulus efforts. However, the benchmark S&P 500 still closed less than 9% below its February 19 record.

While bank stocks provided one of the biggest boosts on Thursday, Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, said investors were buying the dip after a pullback in stocks on Wednesday.

"None of those issues that caused yesterday's weakness were really resolved today," said James. "You could argue that the market could be a fair amount lower. The reason we're not is there is still some understanding that things are going to have a brighter ending at some point."

The Dow Jones Industrial Average rose 1.18 percent to 25,746, the S&P 500 gained 1.10 percent, to 3,084 and the Nasdaq Composite added 108 points, or 1.09 percent, to 10,017.

The Federal Reserve was due to release results of annual bank stress tests after the markets close, potentially indicating how much flexibility banks will have to return capital to shareholders.

"The risk-reward bias favors a more positive bias into the results this evening because the sector has been such a laggard," said Wedbush's James. (Reuters)