Cautious optimism on Wall Street, markets rise with aid hope
NEW YORK (AP) — Stocks capped a wobbly day on Wall Street with solid gains Thursday, reflecting cautious optimism among investors that emergency action by the U.S. government and central banks will cushion the global economy from a looming recession caused by the coronavirus pandemic.
The swings in the market were markedly less volatile
than recent days. The Dow Jones Industrial Average gained almost 200
points, or 0.9%. The S&P 500 rose 0.5% after bouncing between a gain
of 2.9% and a loss of 3.3% early. That would be a notable change in
normal times, but the index has had eight straight days where it bounced
up or down between 4.9% and 12%.
Markets have been so volatile
because investors are weighing the increasing likelihood of a recession
on one hand against huge, emergency efforts to prop up the economy on
the other. Markets got more of each on Thursday.
The number of
Americans filing for unemployment benefits jumped by 70,000 last week,
more than economists expected, in one of the first signs of layoffs
sweeping across the country. Wide swaths of the economy are grinding
closer to a standstill, from the travel industry to restaurants, as
authorities ask Americans to stay home to slow the spread of the virus.
Another weak manufacturing report, this time in the mid-Atlantic region,
added to the worries.
But the world’s largest central banks
announced their latest efforts to support financial markets and the
economy. The European Central Bank launched an expanded program to buy
up to 750 billion euros ($820 billion) in bonds, and the Bank of England
cut its key interest rate to a record low of 0.1%.
The Federal
Reserve unveiled measures to support money-market funds and the
borrowing of dollars as investors in markets worldwide hurry to build up
dollars and cash. The dash for cash has strained markets, and sellers
of even high-quality bonds say they’re having difficulty finding buyers
at reasonable prices. Many of the Fed’s moves, which are getting revived
after being used in the 2008 financial crisis, are aimed at smoothing
out operations in such markets.
“Every day there’s another
announcement of what the stimulus is going to look like, but what seems
to be apparent is the recognition of some in the administration that
funding is going to have to be larger, more significant than initially
expected,” said Quincy Krosby, chief market strategist at Prudential
Financial.
Investors also appeared encouraged by reports that
China is set to ramp up stimulus spending after the province where the
virus first emerged showed no new infections on Wednesday.
The
price of U.S. crude oil notched its biggest one-day jump on record
Thursday, climbing nearly 24%. With the gain, oil recouped nearly all
its losses from the day before. Traders likely bid up oil prices
following published reports saying the U.S. may intervene in an oil
price war between Saudi Arabia and Russia that’s helped knock oil prices
into a steep skid this month.
Still, the market will likely
remain volatile until investors see more economic data that shows just
how badly the outbreak is hurting the economy.
“They’re doing what they can, and I’m not sure what else they can do,” said Sal Bruno, chief investment officer at IndexIQ.
The
Dow rose 188 points, or 1%, to 20,087. It had been down as much as 721
points earlier and as high as 543. The Nasdaq, which is dominated by
tech giants such as Apple, gained 2.3%.
The S&P 500, which
drives movements for most 401(k) accounts more than other indexes, is
down roughly 29% since its record exactly a month ago and close to its
lowest point since late 2018.
Major indexes started the day lower,
then rose before and during a late morning news conference led by
President Donald Trump to give updates on the outbreak. The gains were
mostly gone in early afternoon trading as the indexes turned mixed. The
indexes snapped back into the green by mid-afternoon, however.
European
stocks swung from gains to losses and back to gains. Asian markets
dropped following the brutal 5.1% loss for U.S. stocks the prior day.
Ultimately,
investors say they need to see the number of new infections stop
accelerating for the market’s extreme volatility to ease.
The
total number of known infections has topped 220,000 worldwide, including
nearly 85,000 people who had recovered. The death toll has crept toward
10,000.
For most people, the coronavirus causes only mild or
moderate symptoms, such as fever and cough, and those with mild illness
recover in about two weeks. Severe illness including pneumonia can
occur, especially in the elderly and people with existing health
problems, and recovery could take six weeks in such cases.
Until
the number of new cases peak, investors will struggle with uncertainty
about how much to pay for a stock, bond or commodity when they don’t
know how long the economic downturn will last. Many economists expect a
sharp drop in the economy, but they disagree on how long it will take to
bounce back.
The hope is that all the emergency actions by
central banks and spending by governments can provide support for the
economy in the meantime and soften the blow. The Trump administration
has pitched lawmakers on a program that could flood $1 trillion into the
economy, including checks sent directly to households.
The New
York Stock Exchange said late Wednesday that it will temporarily close
its trading floor and moving to all-electronic trading beginning Monday
after two employees tested positive for coronavirus. The exchange has
also started medically screening all personnel who enter the building.
Much stock trading has gone electronic in recent years, and there are
far fewer floor brokers than there used to be.