So Good It Hertz

By Matthew Klein |  Friday, June 12

Rally time. Whether or not yesterday’s brutal selloff was justified by the news, particularly the rising rate of hospitalizations in parts of the U.S., investors decided that they had overreacted. The S&P 500 spiked almost 3% at the open today, and while the large-cap index gave back some of those gains, it was still a good session for anyone betting on recovery.

The biggest gainers were airlines and cruise lines, the two sectors hit hardest by the pandemic: United Airlines, American Airlines, Norwegian Cruise Lines, Carnival, and Royal Caribbean Cruises were all up by more than 10%. But the recovery was broad-based, with 403 of the 500 components in the S&P 500 up on Friday and 26 of the 30 components in the Dow Jones Industrial Average up for the day. Every S&P sector was up except for utilities, with the biggest gains in financials and real estate. Treasury yields were up slightly, while gold, oil, and the dollar were essentially flat.

But the surest sign of exuberance was the announcement that Hertz, the bankrupt car rental company, would try to raise $1 billion for the benefit of its hard-pressed creditors by selling new stock. Hertz’s stock was up on the news. It could be an intriguing way to bet on an economic recovery, or it could be a tax imposed on sports-bettors-turned-day-traders during an era of easy money. Time will tell.

Speaking of sentiment, the latest consumer data from the University of Michigan shows that there's now a partisan gap in Americans’ assessment of whether things have improved since April. Self-identified Democrats don’t think much has changed, while self-identified independents and Republicans have become significantly more optimistic. It’s possible the economy has improved less in the places where Democrats live, or it could be something simpler: Normal partisan gaps in the perception of the economy could be reasserting themselves now that things have stopped falling off a cliff.

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