US open: Stocks surge on stronger-than-expected retail data

Wall Street stocks recorded solid gains at the bell on Tuesday amid stronger-than-expected retail figures and news of more monetary and fiscal policy support from the Federal Reserve and the White House.

As of 1535 BST, the Dow Jones Industrial Average was up 3.05% at 26,548.00, while the S&P 500 was 2.77% firmer at 3,151.60 and the Nasdaq Composite came out the gate 2.42% stronger at 9,961.56.

The Dow opened 784.84 points higher on Tuesday, continuing on a rally started in the previous session despite market participants struggling with signs of a second wave of Covid-19 cases as the US economy emerges from lockdown.

Sentiment was boosted late in the previous session following an announcement from the Federal Reserve that it would look to purchase individual corporate bonds.

Driving markets at the open on Tuesday, however, was a report from Bloomberg that stated the President was in the process of putting together a $1trn infrastructure proposal.

The report indicated that the White House would be setting aside the majority of the funds for more traditional infrastructure projects, like roads and bridges, but said funds would also be reserved for 5G wireless infrastructure and rural broadband.

Also in focus, investors hoping for a stronger-than-expected reading on monthly retail sales on Tuesday weren't disappointed.

According to the Department of Commerce, in seasonally adjusted terms, US retail sales volumes surged at a 17.7% month-on-month pace in May to reach $485.5bn.

That was comfortably ahead of the 7.4% increase predicted by the consensus and came on top of an upwardly revised 14.7% drop in April (Preliminary: -16.4%).

However, Federal Reserve Chairman Jerome Powell suggested that market participants would be best to not overreact to the surprisingly good economic data.

While Powell admitted that multiple economic indicators had pointed to a stabilisation in activity, he added: "That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery."

Elsewhere on the macro front, industrial production rose by 1.4% in May as factories resumed operations following Covid-19 related shutdowns, according to the Federal Reserve.

Capacity utilisation came in at 64.8% and manufacturing output, which had dropped sharply in March and April, increased 3.8% in May.

On the other hand, business inventories dropped more than expected in April as the Covid-19 pandemic depressed imports, indicating that inventory investment could be a drag on economic output yet again during the second quarter.

The Commerce Department revealed business inventories dropped 1.3% in April after falling 0.3% in March. Economists were expecting a drop of 0.8%.

Lastly, builder sentiment shot up a massive 21 points in June to 58, the largest monthly increase ever in the history of the National Association of Home Builders/Wells Fargo housing market index.

"As the nation reopens, housing is well-positioned to lead the economy forward," said NAHB Chairman Dean Mon. "Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising".

Multiple reports claiming dexamethasone, a widely available drug, could aide critically ill coronavirus patients and had reportedly cut deaths by as much as a third also had investors hopeful.