Stocks jump as investors weigh Gilead virus drug

U. S. stocks rebounded Wednesday as upbeat data on coronavirus treatment from Gilead Sciences offset fresh figures that showed U. S. economic growth contracted more than expected in the first quarter.

The Dow Jones industrial average climbed 2.2%, or 532.31 points to close at 24,633.86, a day after the blue- chip average snapped four straight days of gains. The Standard & Poor’s 500 rose 2.7% to end at 2,939.51.

Shares of Gilead jumped 5.7%. The National Institute of Allergy and Infectious Diseases said a study of the company’s remdesivir drug met its primary endpoint, boosting expectations for a potential treatment.

“It’s encouraging that we’ve seen a successful drug trial for the first time. People are looking for a medicine for COVID- 19 and are interpreting the latest developments with Gilead as a positive for the markets and public sentiment in general,” says Steven Seedhouse, a biotech analyst at Raymond James.

To be sure, the data also shows remdesivir has a modest effect on patients with a specific disease severity, Seedhouse explained.

“It’s a good first step for improving treatment and outcomes for patients,” Seedhouse says. “But we may still need more potent drugs. At the end of the day, remdesivir isn’t going to be sufficient in dramatically shifting public sentiment or people’s willingness to participate in the economy in a normal way.”

It comes as data revealed the U. S. economy, largely shut down by the coronavirus pandemic, ended the longest economic expansion on record.

U. S. gross domestic product, the value of all goods and services produced in the U. S., contracted at a seasonally adjusted annual rate of 4.8% in the January- March period as both consumer and business spending fell sharply, the Commerce Department said Wednesday. It marked the first drop in output since early 2014 and the steepest since late 2008, during the depths of the Great Recession.

Economists surveyed by Bloomberg had forecast a 3.8% decline in GDP.

Investors who want to know when the deepest global downturn since the 1930s might end have been encouraged by plans to reopen factories, retailing and travel. Economists warn they are too optimistic.

“The economic data this morning are backward- looking and markets will continue to be forward- looking, trying to anticipate a resumption of economic activity in the short run and a vaccine or cure in the medium turn,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said in a note. “Given all of the stimulus in the system, markets can continue to move higher, but we remain cautious as a lot of future good news is already priced in.”

Investors seemed buoyed as more governments plan to ease anti- virus controls and allow businesses to reopen. The French and Spanish governments announced plans Tuesday to allow restaurants and other businesses to reopen gradually.