Stocks continued their robust move off of the lows on Tuesday, energized by an epic pop in retail sales combined with optimism over trial results from a potential coronavirus treatment and dreams of additional stimulus from the Fed.

The Dow Jones Industrial Average rallied almost 650 points higher, or 2.5%, while the S&P 500 added 2.15% while the Nasdaq Composite gained 1.93%.

Stock index ETFs are rallying along with the underlying benchmarks. The  SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are tracking stock indexes as well, all green as of 115pm EST.

The U.S. government reported a historic 17.7% increase in retail sales for May. Economists polled by Dow Jones projected an increase of 7.7%. President Donald Trump celebrated the strong data, adding it “looks like a BIG DAY FOR THE STOCK MARKET AND JOBS!”
Meanwhile, a number of reports claimed that dexamethasone, an accessible medication can assist seriously sick Coronavirus patients and supposedly limited Covid-19 deaths in hospitalized patients by up to one third.

“A potential Covid steroid treatment in the UK combined with record retail sales and news of additional stimulus has been met with unbridled optimism,” said Mike Loewengart, a managing director at E-Trade. “We’ve been used to seeing record lows in economic fundamentals over the past few months and to see the pendulum swing so far in the other direction is nothing if not encouraging.”

Stocks had rallied as much 3% before giving up all those gains and testing Monday’s close, after Federal Reserve Chair Jerome Powell said the central bank would vary corporate bond purchasing depending on market conditions, after claiming the Fed would be making those purchases on Monday.

“If the market function continues to improve, then we are happy to slow or even stop the purchases. If it goes the other way, we will increase,” Powell said. I don’t see us as wanting to run through the bond market like an elephant … We want to be there if things turn bad in the economy.”

The Fed’s decision to purchase securities and make moves to bolster the economy have been a key force in moving stocks, with sensitive markets rallying and sinking based on the Fed’s comments. Overall, those comments have injected markets with enthusiasm, however.

“The [S&P 500] followed last week’s sizable drawdown with a daily positive reversal for the ages yesterday,” said Frank Cappelleri, executive director at Instinet. “If there was ever an example of unadulterated dip-buying, we saw it yesterday.”

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