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Stocks soar on vaccine hopes, bailouts and new plans to re-open the global economy

May 26, 2020, 9:13 AM UTC

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Good morning, Bull Sheeters. There’s plenty of green on the screens to start off this holiday-shortened week as investors cheer bailouts, re-openings and vaccine trials.

Here’s where investors are putting their money.

Markets update


  • The Asian indices are trading higher. Even Hong Kong’s Hang Seng, up nearly 2%, is bouncing back strongly after Friday’s plunge.
  • Hong Kong’s CEO Carrie Lam told reporters on Tuesday that the rule of law, independent judiciary and personal freedoms aren’t under threat by Beijing’s sweeping new security proposals, words that seemed to placate investors.
  • On Monday, Japan rescinded its severe COVID-19 state of emergency measures. The much anticipated back-to-work decision comes ahead of schedule.


  • European bourses soared out of the gates on Tuesday. London’s FTSE 100 was up nearly 2% at the open. On Monday evening, British Prime Minister Boris Johnson said most shops and businesses in the U.K. will reopen by June 15.
  • Lufthansa shares took off on Tuesday after the German airline moved closer to a €9 billion ($9.8 billion) bailout from Berlin. Airbus, up 2%, also climbed on the news.
  • Bayer shares were flying as well on Monday (they’re flat today) after the agrochemicals giant said it had reached a verbal agreement to settle a significant portion of the Roundup weedkiller lawsuits it faces.
  • Paris-based Sanofi will sell a $13 billion stake in Regeneron Pharmaceuticals, part of CEO Paul Hudson’s strategy to pivot to fast-growing drug development sectors.


  • The Dow, S&P 500 and Nasdaq futures are all solidly in the green, as I type.
  • Nothing gets investors more giddy than headlines of a coronavirus vaccine breakthrough. They’re getting that today, courtesy of Novavax. The biotech firm announced it’s pushing ahead with trials of its NVX-CoV2373 in Australia.
  • There’s signs of life—faint, it must be said—in the battered U.S. hospitality sector. Spending on hotels, restaurants, airlines appears to be picking up, finally.


  • Gold is down.
  • The dollar is down.
  • Crude is climbing. Brent, the global benchmark, is trading above $36 per barrel.

Welcome to the rally

A bit of a recap as we turn our attention again to the markets after this long weekend. Last week was a good week for the S&P 500. It was up 3.2%, the second positive week out of the past three.

The segments leading the way were not the typical ones. Energy and industrials, to name just two, have been the out-performers of late. That’s despite all the enthusiasm around biotech firms working on coronavirus vaccines and stay-at-home tech stocks.

Today’s chart breaks down the big winners and losers on the S&P last week.

Industrials and energy far outpaced the S&P 500 as a whole last week. These are what you’d call cyclical stocks. They tend to move in line with the performance of the economy. That makes sense. If the economy is booming, energy demand is too.

The economy though is not booming. So why then are investors so excited about cyclicals?

There could be two big reasons. First, bargain hunting. These stocks are dirt cheap. Investors may be betting they can’t possibly fall any further, so now is the time to pounce.

Another explanation is a bit more bullish. Investors may see any progress on the vaccine and re-openings news front as signs an economic recovery is on the horizon. And, remember, a big bounce-back in economic activity should lift cyclicals.

But this trade has some market watchers concerned. As JJ Kinahan, chief market strategist at TD Ameritrade, told the Wall Street Journal, “it makes sense that people are buying cyclicals on the [vaccine] optimism… But the part that makes me nervous is midmonth in June when most states [are open]…I don’t know if the reality will be able to keep up with the great expectations that we’re seeing right now.”

Great expectations seems to embody the mood in the markets—for today, at least. Curves are flattening, more major economies are reopening and more vaccine trials are advancing to the next stage.

It’s a risk-on day.


Postscript: Roman Holiday

Sunday was one of those spectacular late Spring days— cloudless skies, gentle breeze, temps in the low 80s—that, this time of year, the Ministry of Sunshine’s high-propaganda department regularly cooks up to distract us from the rest of the government’s failings.

And so, over morning coffee, we decided, let’s play tourist. My wife and I decided to take the girls into Rome’s centro storico for a gita (excursion) to mark the occasion of the first weekend in Italy in which bars, restaurants and museums were permitted to reopen after a 10-week lockdown. 

The last time we’d set foot in the city center—a trip that, without traffic, takes under 10 minutes from our front door—was February; we were anxious to revisit some favorite haunts. 

What we found was something we won’t soon forget. The city resembled an alien planet. No Russians, No Yanks. No Brits. No Chinese. No Milanese tourists. Just locals. 

It hit me when we got to Piazza Navona. I’ve seen Gianlorenzo Bernini’s fountains there countless times, but never in such an intimate setting. For a good minute or two, it was just me and the river gods; no pesky street vendors getting in my face. 

The Bernini masterpiece, the Fountain of the Four Rivers, has been attracting a crowd in Piazza Navona since the mid-17th Century. It was a quiet affair this past weekend. Original Photo: Bernhard Warner

Around every corner, the restaurants were largely vacant. Many shops hadn’t bothered to open. I wonder if some even will.  

My wife observed that the city looked like a version of Rome from a different era, one frozen in time from, say, the 1950s—no tourists; just scattered groups of masked pedestrians and families on bicycles. I don’t think I even spied a single motorino. Roman Holiday it was not.

After a quick lunch (we were the only diners), we made our way to Sant Eustachio il caffé, long a favorite with food critics, including this amateur one. There was a table! Outside! We grabbed it, and ordered an espresso macchiato for me and two icy caffé granita for everyone else. After the waiter left, I got distracted by the corkscrew spire on Francesco Borromini’s crowning engineering feat, the church of Sant’Ivo alla Sapienza, which looms over the square. What was Borromini thinking!?

Before we could geek out on 17th century Roman baroque architecture, the waiter plopped down a tray of coffees and an €18 euro tab. (That’s why you never grab a table out front.)

Coffee from Sant Eustachio il caffé is a Roman tradition. Original photo: Bernhard Warner.

The next planned stop was Piazza di Spagna; but first a pit stop for gelato and new sandals for the kids. We took the scenic route past the Pantheon (no queue) to the famed gelateria, San Crispino. Another shocker. Closed. I did some window-shopping at Davide Cenci, the near-100-year-old clothing shop, while the kids bought a Plan B gelato from Grom, now part of the Unilever empire. 

By the time we got to the Spanish Steps, I’d lost count of the number of luxury retail boutiques that remained either closed or partially opened along the fashionable via Condotti—Gucci, Prada, Louis Vuitton, Tod’s, Fendi. I guess if the oligarchs aren’t coming to town, there’s no bother opening up.

The famed via Condotti, known for it luxury retail shops, was largely vacant on Sunday. Usually, it’s heaving with shoppers and onlookers. Original Photo: Bernhard Warner.

If via Condotti is any indication, luxury is not having a good pandemic here in the heart of southern Europe. Nor is tourism, which makes up 13% of Italian GDP.

But pedestrians and cyclists are in heaven.

Have a nice day everyone. I’ll see you here tomorrow.

Bernhard Warner

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Today's reads

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