Stocks drop, but hold most gains from big rally
Wall Street closed lower Friday but still notched big gains for the week as investors held out hope that a $2 trillion rescue package will cushion businesses and households from the economic devastation being caused by the coronavirus.
The S&P 500 closed 3.4% lower, but still was up 10.3% for the week, its biggest gain since March 2009. That follows two weeks of relentless selling. The Dow Jones Industrial Average’s 12.8% weekly gain was its biggest since 1938.
Stocks had soared over the previous three days as the relief bill moved closer to becoming law. It passed the House on Friday and President Donald Trump signed it later in the day. The bill includes direct payments to households, aid to hard-hit industries like airlines and support for small businesses. Despite the help, analysts expect markets to remain turbulent until the outbreak begins to wane.
Even after the rally this week the market is still down 25% from the peak it reached a month ago. The outbreak has forced widespread shutdowns that has ground much of the U.S. economy to a halt. This week more than 3 million people filed for unemployment benefits, shattering previous records. It’s the first of what is sure to be many grim signs of the toll the virus is taking on the economy.
“The key at this point is getting a handle on the spread of the virus so that then we can start to think about what (economic) growth looks like for the remainder of the year,” said Willie Delwiche, investment strategist at Baird.
The push to deliver financial relief is taking on more urgency as the outbreak continues to widen. The number of cases in the U.S. has now surpassed those in China and Italy, climbing to more than 97,000 known cases, according to Johns Hopkins University. The worldwide total has topped 580,000, and the death toll has climbed to almost 27,000, while more than 130,000 have recovered.
The latest bout of selling left the S&P 500 down 88.60 points, or 3.4%, to close at 2,541.47. The Dow slid 915.39 points, or 4.1%, to 21,636.78. The Nasdaq lost 295.16 points, or 3.8%, to 7,502.38. The Russell 2000 index of smaller company stocks fell 48.33 points, or 4.1%, to 1,131.99.
Cruise operators Norwegian Cruise Line and Carnival led the decliners in the S&P 500 Friday. The industry has been among the hardest hit by the economic fallout from the coronavirus. The companies are down more than 70% so far this year.
The yield on the 10-year Treasury fell to 0.68% from 0.81% late Thursday. Lower yields reflect dimmer expectations for economic growth and greater demand for low-risk assets.
Gold fell $26.20 to $1,625 an ounce, silver fell 14 cents to $14.53 an ounce and copper fell 1 cent to $2.17 a pound.
The dollar fell to 107.76 Japanese yen from 109.22 yen. The euro rose to $1.1117 from $1.1041.
The overall downturn in the markets in recent weeks is creating good opportunities for investors to buy into sectors of the market that will be “prevalent” for the next decade, including e-commerce and technology companies that focus on things like gene therapies, said Solita Marcelli, deputy chief investment officer, Americas, at UBS Global Wealth Management.
The strong rallies this week have prompted some analysts to suggest the worst of the selling could be over. But most expect stocks to touch on recent lows again until progress shows against the pandemic.
“The takeaway from this week is the initial down phase has probably run its course,” Delwiche said. “Investors can get out of the duck-and-cover mode and start to figure out what they need to do. It doesn’t mean that we’ve gotten an allclear signal.”