U.S. Stocks Set To Open Higher As U.S. Unveils Plan To Reopen The Economy

The U.S. Economy Will Be Reopened In Three Stages

S&P 500 futures are gaining about 3% in premarket trading as investors are optimistic that the U.S. economy will start to reopen soon.

U.S. President Donald Trump has unveiled a plan to restart business activity in three stages, on a state-by-state basis. To enter the first stage, states will have to show a decline in coronavirus cases for 14 days.

Then, they will have to ensure that there is no pick up in cases during the initial phase of reopening.  In this case, they’ll be able to proceed to the second stage, which allows more businesses to open and does not put restrictions on non-essential travel.

The third stage is a return to normal life, although some adjustments will likely have to be made. Investors finally see some real light at the end of the tunnel, so the massive rebound is set to continue.

However, the market will have to face the negative economic data at one point, and China’s example shows it won’t be pretty.

China’s First-Quarter GDP Declines By 6.8%

China reported that its first-quarter GDP shrank by 6.8% while analysts expected it to decline by 6.5%. Given the magnitude and the complexity of the developments both in China and all over the world, China’s results fall into the “in line with expectations” category.

China’s GDP results indicate that the second-quarter U.S. GDP results would be very ugly. China had only one province under the lockdown, and also benefited from the completion of past orders in March.

The International Monetary Fund expects that China will end the year with GDP growth of 1.2%, while U.S. GDP is expected to shrink by 5.9%. Currently, all signs are pointing to the fact that the U.S. GDP performance for second quarter, which is the acute phase of the crisis, will be much worse than China’s results in its most problematic quarter.

Stock Of The Day – Gilead

Gilead shares are currently gaining about 12% in premarket trading following a report that the company’s drug remdesivir could help coronavirus patients.

The report is based on a limited sample of patients and it remains to be seen whether the drug is effective or not, but speculators want to get into the stock to have a chance to participate in a major rally in case remdesivir will prove to be a cure for COVID-19.

I’d expect very volatile trading in Gilead shares today.