S&P 500 clears 3,000 barrier on hopes of recovery, vaccine

(Reuters) – ṄU.S. stocks jumped and the S&P 500 crossed 3,000 points on Tuesday as optimism about a potential coronavirus vaccine and a revival in business activity helped investors overlook simmering Sino-U.S. tensions.

The benchmark index traded above the key psychological level for the first time since March 5, but came off session highs as White House adviser Larry Kudlow said President Donald Trump was “so miffed with China on virus and other matters that the trade deal is not as important to him as it once was”.

Still, all 11 S&P sector indexes were trading higher, with cyclical financials .SPSY and industrials .SPLRCI rising more than 4%.

The S&P 500 index .SPX has risen about 37% from its March lows on central bank and government stimulus at a time when the U.S. economy is seeing its biggest job loss since the Great Depression. It is now about 11% below its February record high.

On Monday, California decided to reopen in-store retail businesses and places of worship from one of the most restrictive shutdowns in the United States.

“People have been locked up and when they see sparkles of hope like vaccines, that drives optimism probably ahead of where it should be and clearly ahead of the economy,” said Richard Steinberg, chief market strategist at Colony Group in Florida.

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Data showed U.S. consumer confidence nudged up in May, adding to hopes the worst of the impact of the shutdown in economic activity was probably in the past.

At 12:31 p.m. ET, the Dow Jones Industrial Average .DJI was up 593.68 points, or 2.43%, at 25,058.84, the S&P 500 .SPX was up 50.88 points, or 1.72%, at 3,006.33. The Nasdaq Composite .IXIC was up 81.78 points, or 0.88%, at 9,406.37.

U.S. biotech group Novavax Inc (NVAX.O) jumped 13.3% as it joined the race to test coronavirus vaccine candidates on humans and enrolled its first participants. Merck & Co Inc (MRK.N) added 1.9% as it announced plans to develop two separate vaccines.

With macroeconomic data pointing at a deep recession, analysts warned the financial markets could be betting on too fast a recovery.

“The impact on the economy and corporate earnings will be seen for several quarters (and) I’m not sure if it has been completely baked into the equity prices,” Robert Wyrick, chief investment officer at Post Oak Private Wealth Advisors in Houston, Texas told the Reuters Global Markets Forum.

Beaten down travel-related stocks soared, with S&P 1500 airlines index .SPCOMAIR up about 11% and cruise operators including Carnival Corp (CCL.N) more than 12.6%.

Meanwhile, the New York Stock Exchange on Tuesday partially reopened its trading floors at the iconic 11 Wall Street building, which had been closed since March 23.

Advancing issues outnumbered decliners by a 6.47-to-1 ratio on the NYSE and by a 3.27-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and no new lows, while the Nasdaq recorded 97 new highs and eight new lows.

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Factbox: New top U.S. spy Ratcliffe known for fierce loyalty to Trump

(Reuters) – The Republican-controlled U.S. Senate confirmed U.S. Representative John Ratcliffe as director of national intelligence on Thursday over Democratic objections, the second time President Donald Trump tapped him for the position.

Here are some facts about the divisive nomination:

RESUME

Ratcliffe, a Republican, was a U.S. attorney and then mayor of Heath, Texas, before he came to the House in 2015. Now 54, Ratcliffe was the most junior member of the House of Representatives Intelligence Committee – with just six months on the panel – when Trump announced on July 28, 2019, that he wanted him to be the top official in charge of the U.S. intelligence community.

Trump abruptly abandoned the plan – blaming the media on Twitter – five days later after members of Congress worried Ratcliffe was too inexperienced, too partisan and amid reports that he had padded his resume by overstating his role in prosecuting terrorism cases.

Trump nominated Ratcliffe again on Feb. 28, after the country had gone since mid-August without a Senate-confirmed Director of National Intelligence, by far the longest period without one since the position was created.

‘BLIND LOYALTY’

Ratcliffe is known as one of Trump’s most loyal and vocal supporters in Congress. He was a major defender of the Republican president throughout last year’s impeachment proceedings. He also lashed out at former special counsel Robert Mueller, who had investigated Trump, when Mueller testified in the House in July.

According to media reports, Trump initially picked Ratcliffe to be DNI because he had liked his aggressive questioning of Mueller during that hearing.

Senate Democratic Leader Chuck Schumer said last summer Ratcliffe had been selected because he had shown “blind loyalty” to Trump.

SINGLE-PARTY SUPPORT

The DNI position was created in the wake of the Sept. 11, 2001, attacks in an effort to unify the intelligence community and better protect the country.

The Senate Intelligence Committee backed Ratcliffe’s nomination by an unusually close 8-7, with no Democratic support. He passed the full chamber in a largely party-line vote, 49 to 44, more “no” votes than for any previous DNI.

Trump’s first DNI, former Republican Senator and U.S. ambassador to Germany Dan Coats, was confirmed by 85-12 in March 2017. The Senate had confirmed James Clapper, a former lieutenant general and intelligence community veteran who served under Democratic President Barack Obama, unanimously in 2010.

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'So much I want to say,' Trump's ex-lawyer Cohen says as he exits prison early

WASHINGTON (Reuters) – Michael Cohen, U.S. President Donald Trump’s former personal attorney, returned to his New York home on Thursday after being released early from a federal prison due to concerns of possible coronavirus exposure.

“There is so much I want to say and intend to say. But now is not the right time. Soon,” Cohen said on Twitter after walking into his Manhattan apartment building, wearing a white surgical mask, blue jeans and a dark blazer.

Cohen, 53, had completed about a year of a three-year sentence for his role paying hush money to two women – pornographic film star Stormy Daniels and former Playboy model Karen McDougal – who said they had sexual relationships with Trump, as well as for financial crimes and lying to Congress.

Trump has denied relationships with either woman.

He is expected to serve the rest of his sentence in home confinement, two sources familiar with the case said on condition of anonymity. Cohen had been eligible for release from prison in November 2021.

Trump’s former campaign chairman Paul Manafort was released from a federal prison in Pennsylvania last week to finish his sentence at home due to similar concerns.

A Cohen lawyer in March said the federal Bureau of Prisons has been “demonstrably incapable of safeguarding and treating BOP inmates who are obliged to live in close quarters and are at an enhanced risk of catching coronavirus.”

Cohen, who once said he would “take a bullet” for Trump, later turned on his former boss and cooperated with Democratic-led congressional inquiries. Trump has called Cohen a “rat.” Cohen has called Trump a “racist,” a “con man” and “a cheat.”

Cohen pleaded guilty to the charges that led to his imprisonment. They also included lying to Congress about plans to build a Trump Tower in Moscow.

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Michigan Governor Whitmer further opens state economy ahead of Trump visit

DETROIT (Reuters) – Michigan’s governor announced more steps to re-open the state’s economy on Thursday, offering timelines for the resumption of some businesses and allowing some social gatherings as long as guidelines to curb the spread of the coronavirus are observed.

Governor Gretchen Whitmer made the announcement ahead of a trip by President Donald Trump to a Ford Motor Co plant in Michigan making ventilators for patients with COVID-19, the disease caused by the novel coronavirus.

In a news briefing on Thursday morning, Whitmer said effective immediately people could meet in groups of up to 10, so long as they observed social distancing restrictions.

Retail stores and auto showrooms can resume operations by appointment beginning on May 26, while increased veterinarian, dental, and medical services will be allowed starting May 29.

“We’ve taken significant steps forward to re-engage our economy safely and responsibly over the past few weeks. Now we are going to take some time to ensure that these new measures are working,” Whitmer said.

She said that she would likely announce another short-term extension of her broader stay-at-home order, which is set to run through May 28.

The move follows the announcement on Monday of a partial reopening in dozens of northern counties starting Friday in an acknowledgement that the outbreak has had less impact on those areas.

Trump, a Republican who is basing his re-election bid in part on a strong economy, has been critical of Whitmer and other Democratic governors over the pace of their re-openings.

Michigan is one of the states harder hit by the virus and has had some of the most restrictive stay-at-home orders in the country.

While polls show she remains popular in Michigan, Whitmer has faced mainstream backlash against the orders, with a growing number of local officials and business leaders arguing the restrictions have outlived their usefulness.

In April, hundreds of protesters, some armed, gathered at the state Capitol in Lansing to demonstrate against the orders.

On Wednesday, Trump threatened to withhold funding from Michigan over its plan for expanded mail-in voting, saying without evidence it could lead to voter fraud. He seemed to back away from the threat later.

Trump won Michigan narrowly in 2016, and it is expected to be a battleground state again in November.

Whitmer is frequently cited as a potential running mate for the likely Democratic presidential nominee, Joe Biden.

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U.S. Senator Rubio: Consensus seen to give companies more time for PPP loans

WASHINGTON (Reuters) – There appears to be agreement in Washington to give companies more time to utilize their coronavirus aid under the Paycheck Protection Program, the head of the U.S. Senate’s small business committee said on Wednesday.

Senator Marco Rubio, in an interview on Fox News, said he would like to see the current eight-week period that the program gives employers to make payroll extended in a so-called clean bill in Congress.

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Powell, Mnuchin face Senate grilling on U.S. coronavirus response

WASHINGTON (Reuters) – The U.S. government’s handling of its massive economic response to the coronavirus pandemic will come under scrutiny on Tuesday as Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell testify before the Senate Banking Committee.

Senators are expected to grill Mnuchin and Powell about actions still needed to keep the world’s largest economy afloat and about missteps in rolling out some $3 trillion in aid so far. (See graphic here showing how the money moved.)

As more states reopen businesses, the government is closing in on the end of an eight-week program to funnel money to small businesses to avoid layoffs, prompting calls to extend the $660 billion Paycheck Protection Program. President Donald Trump said on Monday that such an extension “should be easy.”

Other programs aimed at helping larger companies and municipal bond issuers through a sharp recession are just getting started, and Powell and Mnuchin may provide details on their application at the hearing scheduled for 10 a.m. (1400 GMT).

Powell said in prepared remarks for the hearing released on Monday that the Coronavirus Aid, Relief and Economic Security (CARES) Act was “critical” to the U.S. central bank’s ability to expand credit throughout the economy to offset the blow from the coronavirus.

In remarks broadcast on Sunday night, Powell said unemployment may hit 25% before it begins to fall, with a contraction in gross domestic product of 20% or more. He added that positive “medical metrics” that can build consumer confidence would be critical.

Mnuchin, in his own written testimony on Tuesday, said he also sees high unemployment during the second quarter, but that the overall situation is expected to improve as the U.S. economy starts to reopen.

“Working closely with governors, we are beginning to open the economy in a way that minimizes risks to workers and customers,” Mnuchin said. “We expect economic conditions to improve in the third and fourth quarters.”

Senators are also likely to try to elicit the two officials’ views on another $3 trillion aid bill crafted by House of Representatives Democrats that narrowly passed that chamber on Friday. The measure is opposed by Senate Republicans as negotiations continue between the two parties and the Trump administration.

Before the hearing, Mnuchin is scheduled to meet with Vice President Mike Pence, Senate Majority Leader Mitch McConnell and House Republican Leader Kevin McCarthy at the U.S. Capitol, according to the White House.

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Mnuchin also will face questions by the Senate banking panel over processing glitches that held up small-business loan applications as the Paycheck Protection Program was rushed into service in early April, as well as on abrupt policy changes that required many larger, publicly traded restaurant chains with access to capital markets to return their funds under the threat of audits.

A separate congressional oversight board issued its first report here on the response, consisting largely of questions that could be asked in Tuesday’s hearing.

Among them are how the agencies will measure success and isolate the effects of the measures from other state and federal efforts.

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U.S. Supreme Court heaps more damages on Sudan in embassy bombing cases

WASHINGTON (Reuters) – The U.S. Supreme Court dealt a legal setback to Sudan on Monday, ruling that the African nation cannot avoid punitive damages in lawsuits accusing it of complicity in the 1998 al Qaeda bombings of U.S. embassies in Kenya and Tanzania that killed 224 people.

Siding with hundreds of people hurt and relatives of people killed in the bombings, the justices ruled 8-0 to throw out a lower court’s 2017 decision that had freed Sudan from punitive damages awarded in the litigation in addition to about $6 billion in compensatory damages. Justice Brett Kavanaugh did not participate in the case.

The ruling reinstates about $826 million out of a total $4.3 billion in punitive damages, said Christopher Curran, a lawyer representing Sudan.

The case hinged on the Supreme Court’s view of a 2008 amendment to a federal law known as the Foreign Sovereign Immunities Act allowing for punitive damages. The U.S. Court of Appeals for the District of Columbia Circuit in 2017 upheld Sudan’s liability but ruled that the amendment was made after the bombings occurred and could not be applied retroactively.

Justice Neil Gorsuch wrote in Monday’s ruling that for claims made under federal law, “Congress was as clear as it could have been when it authorized plaintiffs to seek and win punitive damages for past conduct.”

The remainder of the punitive damages will be subject to further litigation as the ruling ordered the D.C. Circuit to reconsider its decision that the foreign plaintiffs who sued Sudan under state law in the United States also could not seek punitive damages.

“As always, Sudan expresses sympathy for the victims of the acts of terrorism at issue, but reaffirms that it was not involved in any wrongdoing in connection with those acts,” Curran said.

Starting in 2001, groups of plaintiffs sued in federal court in Washington under the 1976 Foreign Sovereign Immunities Act, which generally bars claims against foreign countries except those designated by the United States as state sponsors of terrorism – as Sudan has been since 1993.

“It’s hard to imagine an act more deserving of punitive damages, and we are deeply gratified that the Supreme Court has validated our clients’ right to receive this measure of compensation,” said Matthew McGill, a lawyer for the plaintiffs.

Twelve Americans were killed by the Aug. 7, 1998, truck bombs that detonated outside the embassies in Nairobi, Kenya and Dar es Salaam, Tanzania. The lawsuits involve 567 people, mostly non-U.S. citizens who were employees of the U.S. government and their relatives.

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Obama, Biden not targeted in U.S. review of Russia probe, Barr says

WASHINGTON (Reuters) – U.S. Attorney General William Barr said on Monday he does not expect a Justice Department review of the FBI’s handling of 2016 election interference to lead to criminal investigation of former President Barack Obama or former Vice President Joe Biden.

“As to President Obama and Vice President Biden, whatever their level of involvement, based on the information I have today, I don’t expect Mr. Durham’s work will lead to a criminal investigation of either man,” Barr said.

Federal prosecutor John Durham is reviewing the origins of the investigation of Russia’s 2016 election interference.

President Donald Trump in recent weeks has repeatedly referred to a scandal he calls “Obamagate,” saying without evidence that Obama was tied to “the biggest political crime in American history.”

Trump stepped up those claims as he faced criticism for the administration’s handling of the coronavirus pandemic that has killed more than 88,000 Americans, and prepares to face Biden in the November election.

Barr added that the election should be decided strictly on policy debates, and that any investigation of a political candidate would need to be approved by him personally.

“We cannot allow this process to be hijacked by efforts to drum up criminal investigations of either candidate,” Barr said.

Barr did not rule out the possibility of others being criminally investigated, without offering specifics.

Trump has not made clear what he is accusing Obama of doing, but the allegations appear to focus on law enforcement actions taken at the end of Obama’s presidency.

Special Counsel Robert Mueller concluded in March 2019 that Russians had actively tried to interfere in the 2016 presidential election, both through the hacking of the Democratic National Committee’s email system and through propaganda.

While his report documented numerous contacts between Trump’s campaign and Russia, he said there was not sufficient evidence to prove there was a criminal conspiracy.

Russia has repeatedly denied trying to influence the election and Trump has dismissed the idea as a hoax.

Barr has faced scathing criticism from Democrats and former career prosecutors in recent months who say he is the one who has politicized the justice system in favor of allies of Trump.

Earlier this month, Barr moved to dismiss the criminal charges against Trump’s former national security adviser Michael Flynn, who had already pleaded guilty to lying to the FBI.

In February he intervened to recommend a lighter sentence for Trump’s longtime friend Roger Stone.

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Investors prepare for more U.S. stock swings as states reopen

NEW YORK (Reuters) – Investors are bracing for more turbulence in U.S. stocks, as some states prepare to reopen their economies and global trade tensions rise.

The Cboe Volatility Index , known as Wall Street’s fear gauge, posted its biggest weekly gain in about two months, reflecting the S&P 500 index’s .SPX 2.6% slide from its April 29 high. VIX futures have jumped as well, with investors pricing elevated risk into June contracts.

Whether recent losses in stocks resulted from profit taking after April’s swift rally or were the start of a prolonged decline may become more apparent in weeks to come, investors said.

Many are watching progress of U.S. states trying to reopen their economies without fueling a resurgence in coronavirus cases. Parts of New York, Virginia and Maryland moved toward lifting lockdowns on Friday, and Connecticut and Minnesota are set to ease restrictions in the coming week.

“We don’t know what the new normal will be,” said Alessio de Longis, portfolio manager at Invesco. “The managing of expectations will lead to some false steps along the way.”

For now, a pile-up of worrying domestic and international news prompted investors to pull back on equities after the S&P 500 in April notched its best monthly gain in decades.

U.S. President Donald Trump has ratcheted up rhetoric on China, floating the possibility of cutting ties with the world’s second-largest economy. The White House on Friday moved to block shipments of semiconductors to Huawei Technologies Co Ltd [HWT.UL] from global chipmakers, which could put pressure on a global economy already suffering its deepest contraction in decades.

Hopes for a speedy return to normal took another hit when California’s state university system canceled classes for the fall semester because of the coronavirus and Los Angeles County said its stay-at-home order was likely to be extended by three months.

“What we’re seeing now is the wash of realism coming over the market,” said Shannon Saccocia, chief investment officer at Boston Private.

The VIX on Monday touched its lowest level since late February before reversing course as expectations for market volatility grew later in the week.

Concerns over economic reopening are reflected in the VIX futures curve, which shows investors betting volatility will be elevated in coming weeks, rather than later in the summer, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group.

The curve has fluctuated in shape over the past week. On Tuesday, front-month VIX futures VXc1 traded at higher prices than futures expiring in subsequent months, reflecting heightened concern over near-term conditions. While that is no longer the case for now, VIX futures are broadly pricing in higher volatility than they were a week ago.

Several investors are positioning for further turbulence by shunning value sectors such as energy and financials in favor of technology and healthcare, two areas that have held up relatively well during recent market turmoil.

Andrew Graham, managing partner at Jackson Square Capital in San Francisco, has focused on stocks he believes can maintain high dividend yields, especially within the pharmaceutical industry. His firm owns shares of Bristol-Myers Squibb Co (BMY.N), AbbVie Inc (ABBV.N) and Merck & Co Inc (MRK.N).

Investors will also watch the U.S. Treasury Department’s first auction for its 20-year bond on Wednesday. Treasury plans to borrow a record amount of nearly $3 trillion this quarter.

Some investors said they were likely to keep equities at a slight underweight in their portfolios given the likelihood of further declines.

Dave Lafferty, chief market strategist at Natixis Investment Managers, believes the recent stock rally did not factor in the likelihood of businesses operating below their usual capacity even if states reopened their economies.

“Yes, there’s going to be a strong growth rate from the bottom, but the place we’re getting back to is going to be subpar for a while,” Lafferty said. “Are stocks priced for subpar growth? I think they aren’t.”

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Coronavirus boosts U.S. layoffs; job openings fall

WASHINGTON (Reuters) – Layoffs in the United States jumped to a record high in March, while the number of people voluntarily quitting their jobs dropped to a 4-1/2-year low as the novel coronavirus crisis rapidly changed labor market dynamics.

The Labor Department said on Friday in its monthly Job Openings and Labor Turnover Survey, or JOLTS, that layoffs and discharges increased 9.5 million in March to 11.4 million, the highest since the government started tracking the series in 2000. In just over a month, the labor market has shifted from one of worker shortages to the worst since the Great Depression.

Nonessential businesses shuttered in mid-March in the fight to slow the spread of COVID-19, the respiratory illness caused by the coronavirus. Though many are gradually reopening, economists predict it would take years for the labor market and the broader economy to heal. The government reported last Friday that the economy lost a staggering 20.5 million jobs in April, the deepest plunge in payrolls since the Great Depression.

“Latest JOLTS data further illustrates the catastrophic COVID-19 labor market,” said Elise Gould, a senior economist at the Economic Policy Institute in Washington.

The Labor Department’s Bureau of Labor Statistics (BLS), which compiles the report said data collection was affected by the coronavirus pandemic. The BLS said it modified the JOLTS estimates for March to better reflect the impact of the virus.

Layoffs and discharges were led by the accommodation and food services industry, with 4.1 million workers getting pink slips. In the retail sector, 908,000 workers lost their jobs.

The layoffs and discharge rate surged to a record 7.5% in March from 1.2% in February.

The number of people voluntarily quitting their jobs dropped 654,000 to 2.78 million, the lowest since September 2015. The quits rates, which is viewed by policymakers and economists as a measure of job market confidence, dropped to 1.8%. That was the lowest since December 2014 and was down from 2.3% in February.

The government also reported that job openings, a measure of labor demand, dropped 813,000 to 6.19 million on the last business day of March. That was the lowest since May 2017. Vacancies peaked at 7.52 million in January 2019.

The drop in job openings was led by sharp declines in vacancies in the accommodation and food services industry and manufacturing. The job openings rate fell to 3.9% in March from 4.4% in February.

Hiring decreased 658,000 to 5.2 million in March. The hiring rate fell to 3.4% from 3.8% in February.

“While some jobs will be recouped as the economy recovers, we expect the employment shortfall to persist into 2021,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics in New York.

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