Stocks post historic gains, then end week with a thud
Wall Street got a lift last week as the Dow Jones Industrial Average posted its biggest weekly gain since 1938. The Dow is still down 24% for the year. Virus’ impact remains ‘the big, open-ended question’
U.S. stocks ended a historic week to the upside by pulling back Friday, signaling lingering caution among investors on the outlook for the U.S. economy even as Congress passed a massive coronavirus relief package.
The Dow Jones Industrial Average slumped 915.39 points Friday to close at 21,636.78, as the U.S. eclipsed China as the global leader in virus cases. The Standard & Poor’s 500 fell 3.4% to finish at 2,541.47.
Despite Friday’s losses, the Dow still notched its biggest weekly gain in more than 80 years. For the week, it jumped 12.8%, its largest weekly percentage gain since 1938. The S&P 500 rose 10.3%, its biggest such gain since March 2009.
To be sure, the market is still down more than 20% from a peak it reached a month ago. Professional traders say investors need to see a decline in numbers of new infections before markets can find a bottom.
Traders say the passage of a $2.2 trillion fiscal stimulus bill has helped drive the stock market’s double-digit percentage gains this week. Congress and the Federal Reserve have promised an astonishing amount of aid for the economy and markets, hoping to support them as the pandemic shuts down more businesses each day.
The $2.2 trillion coronavirus economic rescue package was signed by President Donald Trump on Friday.
“Now that the fiscal policy is in place and the Treasury has done what they need to do, the attention will turn back to the health crisis,” Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers, said in a note. “Investors have to consider how problems due to lack of business activity will be resolved. That is the big, open-ended question that took this market down.”
Despite strong rallies this week, analysts say further big drops are to be expected until there have been enough sustained gains in the market, and progress in fighting the pandemic, to ease investors’ fear of further declines.
The U.S. last week surpassed China for the most confirmed cases of the virus.
Investors had appeared to shrug off miserable news on unemployment Thursday following a report that nearly 3.3 million Americans applied for unemployment benefits last week, shattering the prior record set in 1982, as layoffs sweep the country.
Wall Street is looking ahead to the March jobs report, due on April 3, for further signs on how the pandemic has affected the economy. The March report could still be too early to reflect the full effects of the coronavirus shutdown. The first post-shutdown jobs report for April will be released on May 8.
“Fiscal stimulus will be coming just in time to help millions of Americans weather the storm, but we’re not out of the woods yet,” Jason Reed, economist, assistant chair and teaching professor of finance at the University of Notre Dame’s Mendoza College of Business, said in a note. “The state of jobless claims and unemployed workers will certainly get worse before it gets better.”