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Optimism surrounding progress of economic reopenings from the COVID-19 disruption persisted, pushing stocks into the green in today's session and moving them further off their March lows. Meanwhile, a host of upbeat data added to the positive sentiment, with global manufacturing and services reports showing improvement in May from April's stark drop, and as ADP's U.S. private sector employment report for May came in much better than expected ahead of Friday's key nonfarm payroll release. News on the equity front also appeared to add to the mood, as Zoom Video Communications, Campbell Soup and CrowdStrike all issued upbeat earnings reports and Microchip Technology raised its guidance. Treasury yields rallied amid a decline in bond prices, and the U.S. dollar lost ground, extending a recent slide, while crude oil prices were modestly higher after pausing from a recent surge, and gold tumbled. Markets in Europe and Asia also saw solid gains.

The Dow Jones Industrial Average rallied 527 points (2.1%) to 26,270, the S&P 500 Index advanced 42 points (1.4%) to 3,123 and the Nasdaq Composite increased 75 points (0.8%) to 9,683. In heavy volume, 1.1 billion shares were traded on the NYSE and 4.6 billion shares changed hands on the NASDAQ. WTI crude oil gained $0.48 to $37.29 per barrel and wholesale gasoline was unchanged at $1.12 per gallon. Elsewhere, the Bloomberg gold spot price declined $29.18 to $1,698.52 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.4% at 97.24.

Zoom Video Communications Inc. (ZM $224) reported Q1 earnings-per-share (EPS) of $0.09, or $0.20 ex-items, versus the $0.09 FactSet estimate, as revenues jumped 169% year-over-year (y/y) to $328 million, above the Street's forecast of $204 million. The video-conferencing company said the COVID-19 crisis has driven higher demand for distributed face-to-face interactions and collaboration using Zoom. The company issued Q2 guidance that was well above expectations and it boosted its full-year outlook. Shares traded nicely higher.

Campbell Soup Company (CPB $49) posted fiscal Q3 EPS of $0.55, or $0.83 ex-items, versus the expected $0.75, with revenues rising 15.0% y/y to $2.2 billion, roughly in line with forecasts. The company said its organic sales—excluding acquisitions, divestures and foreign exchange—grew 17.0% as it experienced unprecedented broad-based demand across its brands as consumers sought food that delivered comfort, quality and value. CPB raised its full-year EPS and revenue guidance. Shares were lower, likely due to the optimism of economic reopenings that appears to be fostering some uncertainty regarding the sustainability of the unprecedented demand for food that can be prepared at home.

CrowdStrike Holdings Inc. (CRWD $98) announced a Q1 loss of $0.09 per share, or EPS of $0.02 ex-items, compared to the Street's forecast of a loss of $0.06 per share. Revenues rose 85.0% y/y to $178 million, topping the expected $165 million. The cloud-delivered endpoint protection company said it finished the quarter with strong momentum and delivered results that exceeded its expectations as customers continued to prioritize their cybersecurity investments. CRWD issued Q2 and full-year guidance that was above forecasts. Shares finished solidly higher.

Microchip Technology Incorporated (MCHP $109) rallied over 10% after the smart, connected and secure embedded control solutions company raised its Q1 EPS guidance, noting that COVID-19 related supply chain disruptions have eased. MCHP added that it has begun to make up for lost production and expects to continue to gain ground through the end of this quarter.

The stock markets continue to rally after the plunge to the March 23^rd lows, and Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her latest article, Disconnect the Dots: Main Street vs. Wall Street, how the news doesn't get better, but the market's ability to shrug it off continues to breed questions about the perceived disconnect between Main Street and Wall Street. Liz Ann notes that surging liquidity and hopeful virus treatment/vaccine news have been significant tailwinds behind stocks, but heightened complacency could breed risks, with no shortage of potential negative catalysts.

Stay on top of the markets during this unprecedented time by following experts from the Schwab Center for Financial Research (SCFR) on Twitter at @SchwabResearch, and visiting www.schwab.com/volatility to see all the content Schwab offers on the unparalleled market action.

May Service sector activity improves, ADP private sector employment report tops forecasts

The May Institute for Supply Management (ISM) non-Manufacturing Index (chart) rose to 45.4 from April's 41.8, above the Bloomberg forecast of an improvement to 44.4, with a reading below 50 denoting contraction. The index rebounded from the lowest level since March 2009, as the new orders component rose to 41.9 from 32.9 and employment increased to 31.8 from 30.0, while the business activity portion of the report jumped to 41.0 from 26.0, after registering the lowest reading since the report began in 1997. The ISM said respondents remain concerned about the ongoing impact of the coronavirus, but many of the respondents' respective companies are hoping and/or planning for a resumption of business.

The final Markit U.S. Services PMI Index for May was revised modestly higher to 37.5 from the preliminary estimate of 36.9, and compared to the expected adjustment to 37.3. The Index improved from April's record low of 26.7, but a reading below 50 denotes contraction. Markit's release is independent and differs from the ISM report, as it has less historic value and Markit weights its index components differently, while its survey respondents include those that vary more in company size, including the small and medium-sized companies.

The ADP Employment Change Report showed private sector payrolls dropped by 2,760,000 jobs in May, much better than forecasts of a 9,000,000 drop, while April's decrease of 20,236,000 jobs was revised to a 19,557,000 fall. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday's broader May nonfarm payroll report, expected to show jobs fell by 8,000,000 and private sector payrolls dropped by 7,500,000 (economic calendar). The unemployment rate is forecasted to jump to 19.5% from 14.7% and average hourly earnings are projected to rise 1.0% month-over-month (m/m), and be up 8.5% y/y.

The MBA Mortgage Application Index declined 3.9% last week, following the prior week's 2.7% gain. The decrease came as an 8.6% drop in the Refinance Index more than offset a 5.3% rise for the Purchase Index. The average 30-year mortgage rate fell 5 basis points (bps) to 3.37%.

Factory orders (chart) fell 13.0% month-over-month (m/m) in April, versus expectations of a 13.4% drop, and compared to March's downwardly-revised 11.0% fall. Stripping out the volatile transportation component, orders fell 8.5% compared to March's negatively-adjusted 4.0% decrease. Final durable goods orders (chart), preliminarily reported last week, were revised lower to a 17.7% m/m drop for April, and orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were adjusted downward to a 6.1% fall.

Treasuries fell, as the yield on the 2-year note rose 3 bps to 0.19%, the yield on the 10-year note gained 8 bps to 0.76%, and the 30-year bond rate increased 7 bps to 1.55%.

Bond yields have remained subdued, despite the rally in the stock markets, amid the backdrop of the massive amount of monetary and fiscal policy stimulus and Schwab's Chief Fixed Income Strategist Kathy Jones notes in her article, Stimulus = Inflation? Why It May Be Different This Time, how despite massive fiscal and monetary stimulus, we believe there's little risk of inflation in the next few years. Schwab's Liz Ann Sonders provides her article, Every Picture Tells a Story: "Chartbook" Look at Economy/Market, offering a visual look at the latest trends and statistics across the spectrum of the economy, policy and the stock market.

Tomorrow's economic calendar will offer the April trade balance, expected to show the deficit widened to $49.2 billion from the $44.4 billion posted in March, as well as final Q1 nonfarm productivity and unit labor costs with productivity forecasted to be revised lower to a decline of 2.7% quarter-over-quarter (q/q) from the 2.5% q/q fall preliminarily reported, and labor costs to be adjusted upward to an increase of 5.0% q/q from the previous 4.8% rise. Weekly initial jobless claims are also on tap, with economists projecting that 1,823,000 first-time applications for unemployment were filed for the week ended May 30.

Europe and Asia higher as stimulus and reopening progress remains catalyst for stocks

European equities finished solidly higher to extend a recent rally, as the global markets continued to find support from data showing that the progress of economic reopenings across the globe is fostering a recovery in activity. Moreover, the massive amount of fiscal and monetary policy stimulus continued to buoy the markets, with Germany appearing to be heading toward another dose of economic relief and as the European Central Bank is set to deliver its monetary policy decision tomorrow amid expectations further support could be in the offing. In economic news, Markit's Eurozone Composite PMI Index—a gauge of output from the manufacturing and services sectors—showed May activity improved solidly from April, but remained in contraction territory. Markit's read on U.K. manufacturing and services sector activity in May also showed a decisive improvement but continued contraction. The euro and British pound rose versus the U.S. dollar, which has added to a recent retreat, while bond yields in the region gained ground. With the global stock markets rallying sharply as of late from the severe COVID-19 shock, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers his article, What's Wrong With the Rebound?, noting how the unusual market leadership could mean the market is sending one of two worrisome messages: we haven't seen the low yet or the recovery is likely to be very weak.

The U.K. FTSE 100 Index was up 2.6%, Germany's DAX Index rallied 3.9%, France's CAC-40 Index jumped 3.4%, Spain's IBEX 35 Index advanced 3.0%, Italy's FTSE MIB Index increased 3.5%, and Switzerland's Swiss Market Index rose 2.3%.

Stocks in Asia finished higher as the global markets continue to express optimism regarding the recovery in the economy amid reopening progress and data showing that May activity in the manufacturing and services sectors improved from April's sharp plunge. Also, the recent drop in the U.S. dollar has also helped amplify the boost for emerging market stocks. Schwab's Jeffrey Kleintop notes in his commentary, What Will The Recovery Look Like?, how early signs in Asia of a V-shaped rebound are encouraging, but may instead look more like a square root, flattening out as weaker global growth saps Asian economic momentum in the second quarter. Jeff concludes with noting that emerging markets, led by China and South Korea, are leading the recovery in the economy and markets as they did during the global recessions of 2000-02 and 2008-09.

Japan's Nikkei 225 Index rose 1.3%, with the yen weakening, while South Korea's Kospi Index rallied 2.9% to lead the advance in the region. China's Shanghai Composite Index ticked 0.1% higher as tensions between the nation and the U.S. continued to simmer, while the Hong Kong Hang Seng Index gained 1.4%. Australia's S&P/ASX 200 Index rose 1.8% and India's S&P BSE Sensex 30 Index moved 0.8% to the upside.

In addition to the aforementioned ECB monetary policy decision, other items on tomorrow's international economic calendar include trade data from Australia, CPI from Switzerland, and retail sales from the Eurozone.

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