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Hello. I’m James Willhite, with Friday’s premarket update before we all take a break for the holiday weekend.

Futures are down. Stocks in Hong Kong are leading declines after the Chinese government signaled it will impose new national-security laws on the territory, dealing a blow to its autonomy. China also scrapped its GDP target, a worrisome sign for a world that’s dependent on the country’s growth. The European Central Bank will release minutes from its most recent meeting shortly, and investors will scrutinize them for evidence it was considering more stimulus—something the Federal Reserve was doing at the time.

Meanwhile, our Paul Vigna explains why the Fed was the week’s big winner, even eclipsing the company that delivered promising news on a coronavirus vaccine.

Programming note: There will be no Markets newsletter on Monday for the Memorial Day holiday. We’ll be back in your inbox on Tuesday.

 

Markets in a Minute

Markets Data
 
 

Overnight Developments

  • Global stocks declined Friday, led by a steep drop in Hong Kong shares, as rising tensions between Washington and Beijing and the gloomy outlook for China’s economy weighed on investors’ sentiment.
     
  • Read our full market wrap here
 

Markets Get a Shot of Fed Adrenaline

By Paul Vigna, markets reporter

 
 

Equities broke out this week, driven by promising news and a renewed promise from the Federal Reserve.

All 50 states have now taken at least some measures to reopen, and a number of governments overseas have as well. Two companies announced positive results from early trials of possible Covid-19 vaccines. Even a couple of retailers had some surprisingly decent earnings reports.

All of that helped propel the S&P 500 to its highest point since early March. U.S. crude oil rose 19% on Tuesday alone, and a number of observers have declared the bottom for commodities.

Who were this week’s real winners and losers? Let’s take a look.

Winner: The Fed

We were tempted to go with either Moderna Inc. or Inovio Pharmaceuticals Inc. for this week’s winner, based on their progress on potential vaccines. But if you really think about it, the winner has to be the Fed.

After last week’s selloff—itself sparked by comments from Chairman Jerome Powell—the market was in a sour mood. It needed a confidence boost. The central bank delivered.

“You wouldn’t want to bet against the American economy,” Mr. Powell said during Sunday’s interview on “60 Minutes.”

That put the markets in a good mood for Monday. Add in the Wednesday release of the Fed-meeting minutes, and the market was reassured that the only thing it seems to care about was still there.

“The only certainty in the current environment is the continued promise from the Fed of unlimited support,” Canaccord Genuity analyst Tony Dwyer wrote.

Loser: The Bears. (Or Is It Really the Bulls?)

The bulls and bears have been locked in a tug of war for the past month. This week, one appeared to win.

Driven by all of the above, the S&P 500 traded as high as 2980 on Wednesday. It is only a hair underneath its 200-day moving average (2999), and only 13% off its February record of 3386.

So, a clean win for the bulls, right? Not exactly.

Even with the Fed’s unlimited power, the pandemic isn’t over and the economy has a long road in front of it. The Congressional Budget Office predicted the U.S. will be digging out of this hole for the next 18 months.

Next Week: Consumer Data

Economic reports are starting to fully reflect the pandemic’s effects, and next week brings several that focus on consumers. Consumer-confidence reports for May come from the Conference Board on Tuesday and University of Michigan on Friday. New-home sales for April will be reported Tuesday. The April durable-goods report and weekly jobless claims arrive Thursday. Personal income and spending lands Friday.

There isn’t likely to be anything outright good in those reports, but there may be signs at least that the bottom has been hit.

For a longer version of this article online, follow this link.

Are investors in the stock market getting ahead of themselves? Let us know by replying to this email. Your comments may be edited before publication in future newsletters, and please make sure to include your name and location.

 
 
Market Facts
  • Prices for the revamped 20-year Treasury bond climbed Thursday in its debut session. Its yield closed at 1.165%, according to Tradeweb, a day after the Treasury Department sold the bond at a yield of 1.22%. The Treasury Department auctioned its first 20-year bonds since 1986 on Wednesday.
     
  • Insurance-policy comparison company SelectQuote’s shares climbed nearly 36% in its first day of trading Thursday. It is set to be the largest U.S. initial public offering since February, as the coronavirus pandemic continues to throw companies’ plans to go public into disarray.
     
  • On this day in 1928, Thomas Boone Pickens was born in Holdenville, Okla., the son of a “landman” (an agent who tries to get landowners to sell oil companies the rights to explore for oil on their property). He later headed Mesa Petroleum and, with his unsolicited bid to buy Cities Service Co. in 1982, set off the hostile takeover wars of the 1980s. He remained a big personality in the energy world until his death in 2019.
 
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