Stock market rallied on Tuesday. What caused sudden surge?

Stock market rallied on Tuesday. What caused sudden surge?

The stock market surged forward on Tuesday. The Dow Jones Industrial Average jumped up by 3.24% at 24,453.18, and the Nasdaq Composite gained 2.42% at 9,232.45.

The S&P 500 also gained 2.93% at 2,947.73. It has traded in a tight range in May, but yesterday it was on track for its highest one-day percentage gain in five weeks. The S&P 500 has risen by 34% since March.

Furthermore, the airlines’ subindex skyrocketed by 9.3% after Delta Air Lines announced that it would resume flying several major routes in June. Travel-related stocks also soared from 13% to 18%, cruise line operators Royal Caribbean Cruises Ltd, Carnival Corp, and Norwegian Cruise Line Holdings Ltd among them.

Economic activity slowly resumes worldwide. Energy stocks rallied by 6.4% as oil prices jumped on the prospect of higher demand. General Motors Co gained 8.7%, and Ford Motor Co rose by 6.7%. Both of them are preparing to reopen their North American factories.

What caused the market’s latest rally?

U.S. futures hit high on Monday as drugmaker Moderna Inc announced that its experimental COVID-19 vaccine showed promising results during a small early-stage trial. The company’s shares increased by 23% due to the new data about a potential coronavirus vaccine. Investors are also expecting that authorities will pump in more stimuli to jumpstart the U.S. economy.

Easing lockdowns sparked hopes for an economic rebound despite the fears of another wave of infection. Jerome Powell, Federal Reserve Chair, affirmed that more monetary stimulus was on the way if required, boosting the futures. However, he also underlined the importance of a vaccine in establishing economic normalcy.

Both analysts and investors agree with Powell. If there is a workable vaccine that can be mass-produced, it will be a game-changer for many industries that couldn’t solve their problems by reopening – stated Rick Meckler from Cherry Lane Investments in New Jersey.

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