U.S. stock markets opened modestly higher on Tuesday, with support from both financial and energy stocks as tail risks for both sectors receded.
Crude prices were underpinned by the announcement of further cuts in production by some of the world’s largest exporters over the last 24 hours – Saudi Arabia, Kuwait and the United Arab Emirates, as well as Kazakhstan. Financials, meanwhile, were helped by assurances from the Federal Reserve that it still doesn’t intend to cut interest rates below zero next year.
By 9:35 AM ET (1335 GMT), the Dow Jones Industrial Average was up 97 points or 0.4% at 24,319 points, while the S&P 500 and the Nasdaq Composite were both up 0.1%.
The mood remained nonetheless cautious, amid lingering concerns that the rushed reopening of the U.S. economy may lead to a second wave of infections and lockdowns later in the year.
“Some U.S. states that are relaxing restrictions are not always those that should, being earlier on the recovery curve, either having peaked later or still increasing,” analysts at Sanford C Bernstein wrote in a note to clients. “We believe multiple U.S. states will struggle with further relaxing requirements as disease trends will start heading the wrong way. Modelling the pandemic forward suggests even moderately elevated Rt =1.05 will lead to unacceptable disease rates come the fall.”
The U.S. Senate is due to hear testimony from top scientists later Tuesday on the risks of reopening the economy. One of the scientists testifying will be Dr. Anthony Fauci, director of the National Institute for Allergies and Infectious Diseases. The New York Times (NYSE:NYT) cited an email from Fauci on Tuesday saying that a premature opening “risks needless suffering and death.”
Against that backdrop, Tesla (NASDAQ:TSLA) stock rose 2.1% after CEO Elon Musk reopened the company’s production facility in Fremont before getting the approval of local authorities, who still have an extensive lockdown order in place.
Before the market opened, futures had pared gains after data showing the biggest drop in inflation in over a decade. The consumer price index fell 0.8% after a 0.4% drop in March, underlining fears about the weakness of demand.