Stocks charge higher on hopes for progress in fighting virus
Stocks around the world whipped higher Wednesday, riding a wave of optimism on encouraging data about a possible treatment for COVID-19.
The upswell of hope was so strong that investors completely sidestepped a report showing the outbreak drove the U.S. economy to its worst quarterly performance since the Great Recession. The S&P 500 vaulted 2.7% higher and extended a rally that’s brought the U.S. stock market to the brink of its best month in 45 years.
The spark for Wednesday’s rally was a report that an experimental drug proved effective against the new coronavirus in a study run by the National Institutes of Health. The nation’s top infectious diseases expert said the drug reduced the time it takes patients to recover, and it raised hopes that life around the world may eventually tiptoe back toward “normal.”
The S&P 500 rose 76.12 points to 2,939.51. It has surged 13.7% in April, and it’s a day away from closing out its best month since late 1974.
The Dow Jones Industrial Average rose 532.31, or 2.2%, to 24,633.86, and the Nasdaq climbed 306.98, or 3.6%, to 8,914.71.
The Federal Reserve said Wednesday that it expects the health crisis to weigh on the economy “over the medium term,” as it promised to keep in place massive amounts of aid and interest rates at nearly zero. Oil prices, bonds and other markets besides stocks have also been dominated in recent weeks by worries about the economic impact of the virus outbreak.
Job losses have exploded since early April, as layoffs sweep the nation following widespread stayat-home orders, and economists expect to see even worse numbers for the second quarter of the year.
But stocks have been rallying over the last month as investors look beyond the current economic devastation and focus instead on the prospect of economies gradually reopening. Some U.S. states and nations around the world have laid out plans to relax restrictions keeping people at home and businesses bereft of customers. Any new treatment for COVID-19 could also lower the dread so prevalent among households and businesses around the world.
But what got the 31.4% rally for the S&P 500 started in late March was massive aid from the Federal Reserve and Congress. The Fed on Wednesday said it wouldn’t be pulling back on the aid anytime soon.
When recession worries were at their height, investors punished small-cap stocks and sent them to sharper declines than the rest of the market, in part on worries about their more limited financial resources. But the Russell 2000 index of small-cap stocks jumped 4.8% Wednesday. It’s up 10.4% this week alone, more than double the gain for indexes of bigger stocks.
The yield on the 10-year U.S. Treasury rose to 0.62% from 0.61% late Tuesday after paring earlier losses. Yields tend to rise when investors are upgrading expectations for the economy and inflation.
Oil prices are continuing their extreme swings after a collapse in demand has sent crude storage tanks close to their limits. Benchmark U.S. crude oil for June delivery rose $2.72, or 22%, to settle at $15.06 a barrel Wednesday. Brent crude oil, the international standard, rose $2.08, or 10.2%, to $22.54 a barrel.