Dow jumps 500 points as May retail sales surge to record

U.S. stocks extended gains Tuesday for the third consecutive session after retail sales rebounded in May, rising to a record as businesses that were battered by the coronavirus pandemic started to reopen.

The Dow Jones industrial average jumped 526.82 points to close at 26,289.98 after rising nearly 850 points following the opening bell, the latest set of swings for markets in recent sessions following a weekslong rally.

The Standard & Poor’s 500 climbed 1.9% to end at 3,124.74, driven by gains in retail and airline stocks that are tied to the economy reopening. Industrial stocks were generally strong, as were producers of raw materials.

Trading remains very skittish as worsening coronavirus trends in several hotspots around the world rattle investors. The S&P 500 shot to an early 2.8% gain, lost nearly all of it at one point and then rallied back.

Retail sales jumped in May following three straight months of declines, as consumers started shopping again after states began reopening businesses following widespread shutdowns to contain the virus. Sales surged 17.7% in May, according to the Commerce Department, the largest monthly jump ever after a historic 16.4% drop in April.

To be sure, the rebound was widespread but was concentrated among the hardest-hit sectors including clothing, furniture, electronics and motor vehicles. Sales at restaurants and bars saw a 29% rebound. Economists caution that these industries are still recovering from very depressed levels.

“The recovery in consumption will continue as the country emerges from lockdown, but it will be restrained by lingering virus fear and constrained income growth,” Gregory Daco, chief U.S. economist of Oxford Economics, said in a note. “The prospects of elevated unemployment, weaker wage growth and depressed confidence mean that it could take a while to see a full recovery of the U.S. economy’s main engine.”

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Investors turned their attention to Federal Reserve Chairman Jerome Powell, who testified before Congress on Tuesday about the central bank’s semiannual monetary policy report.

Powell renewed the central bank’s vow to keep interest rates near zero until “the economy has weathered recent events,” noting significant uncertainty about the strength of the recovery from the coronavirus pandemic despite a recent "modest" rebound.

Stocks were also higher after a separate report said the Trump administration is preparing a nearly $1 trillion infrastructure proposal to help boost economic growth.

A preliminary version of the infrastructure proposal is being prepared by the Department of Transportation that would set aside most of the money for traditional infrastructure projects such as roads and bridges, but funds would also be reserved for 5G wireless infrastructure and rural broadband, Bloomberg News reported.

Shares of retailers and airliners led gains. American Airlines, United and Delta rose at least 2% apiece. Carnival and Royal Caribbean rallied 5.1% and 2.8%, respectively. Kohl’s and Macy’s gained at least 6%.

Stocks kicked the week off higher on Monday following a roller-coaster session after the Fed moved to support markets battered by the pandemic. The central bank announced Monday that it will buy individual corporate bonds as part of its previously announced program to keep lending markets running smoothly and allow big employers to get access to cash.

The move was the latest reminder the Fed is doing everything it can to help support markets, analysts said. Central banks have repeatedly come to the economy’s rescue over the years, and it was huge, unprecedented moves by the Fed earlier this year that helped put a halt to the S&P 500′s nearly 34% sell-off on worries about the recession coming out of the coronavirus pandemic.

Still, the number of COVID-19 cases is still growing around the world. Governments are relaxing lockdowns in hopes of nursing their devastated economies back to life, but without a vaccine, the reopenings could bring on further waves of COVID-19 deaths.

“Three things need to happen in order for the market to resume its upward trajectory: positive news on the economy, positive news on treatments for the virus, and continued fiscal and monetary support,” Bruce Bittles, chief investment strategist at Baird, said in a note. “The number one potential roadblock is whether we have an outbreak of the virus in the coming months.”

The yield on the 10-year Treasury rose to 0.75% from 0.70% late Monday, after earlier climbing as high as 0.78%. It tends to move with investors’ expectations for the economy and inflation.

Benchmark U.S. crude oil for July delivery rose $1.26 to settle at $38.38 a barrel Monday. Brent crude oil for August delivery rose $1.24 to $40.96 a barrel.

In Europe, Germany’s DAX rose 3.4%. France’s CAC 40 gained 2.8% and Britain’s FTSE 100 added 2.9%. Elsewhere, Japan’s benchmark Nikkei 225 surged 4.9%. South Korea’s Kospi gained 5.3%, while Australia’s S&P/ASX 200 jumped 3.9%. Hong Kong’s Hang Seng added 2.4%. The Shanghai Composite edged up 1.4%.

Contributing: The Associated Press

This article originally appeared on USA TODAY: Dow soars 500 points as May retail sales surge to record