Bears looking for a retest of the market lows may soon have egg on their face.
“Depending on how the market plays out over the next couple of days, this might be all she wrote in terms of a retest,” Sam Stovall, chief investment strategist at CFRA tells Yahoo Finance.
He says we may have already hit the bottom as the conversation shifts from coronavirus cases to reopening the economy.
“I see the bottom on March 23, but then I look and I've seen, we've already had one semi retest, where in a sense we've pivoted, come back down a bit, and then worked our way higher. We're going through that process once again.”
The Dow (^DJI) is up 26% from its 52-week low, while the S&P 500 (^GSPC) is up 25% from its low on March 23rd. On Thursday The Nasdaq (^IXIC) closed above its 200 day moving average for the 2nd time in three trading session as Amazon (AMZN) and Netflix (NFLX) reached all time highs.
The rebound comes despite a backdrop of weekly unemployment claims in the millions, a historic plunge in retail sales, and the biggest drop in manufacturing since 1946. Goldman Sachs predicts GDP in the U.S. will shrink a whopping 24% in the 2nd quarter, and rebound in the 3rd and 4th quarter.
“So many strategists are calling for a retest that Mr. Market will try to embarrass the greatest number of strategists at any one point in time,” said Stovall.
‘The market is just thrilled that now we're talking about reopening’
On Thursday President Trump laid out guidelines for reopening the economy. The plan defers to governors the reopening of their state economies. Governor Cuomo of New York has already extended the state’s shelter in place orders until May 15.
“The market is just thrilled that now we're talking about reopening because that re-establishes the opportunity for some sort of a V-shaped recovery,” says Stovall.
The debate among strategists on what the shape of the recovery will look like has been ongoing. One BMO strategist says investors should stop trying to guess the shape of it, that the market still has to digest through the rest of earnings season. This week big banks reported quarterly profit drops as they set aside billions for expected loan losses.
”If we end up seeing some sort of an improvement in earnings estimates as the year progresses, then I think, you know, we could actually be seeing a positive second half,” said Stovall.
Ines covers the US stock market from the floor of the New York Exchange. Follow her on Twitter at @inesreports.