Stock rally fizzles; oil slides
A big rally on Wall Street faded out Tuesday, the latest twist for a market dominated by sharp swings amid the coronavirus outbreak.
The benchmark Standard & Poor’s 500 index ended down 0.2%, erasing a surge of 3.5% from earlier in the day. The market’s gains faded as the price of U.S. crude oil abruptly flipped from a gain to a loss of more than 9%.
That dampened what had been an ebullient day for markets worldwide. European and Asian markets rallied earlier, following Monday’s 7% surge for the S&P 500 on encouraging signs that the coronavirus pandemic may be close to leveling off in some of the world’s hardesthit areas.
Even though economists say a punishing recession is inevitable, some investors have begun to look ahead to when economies will reopen from their coronavirus-induced shutdown. A peak in new infections would offer some clarity about how long the recession may last and how deep it may be.
Investors could then, finally, envision the other side of the economic shutdown, after authorities forced businesses to halt in hopes of slowing the spread of the virus. In the meantime, governments around the world are talking about pumping trillions of dollars more of aid into the economy.
Many professional investors say they’ve been wary of stocks’ recent upsurge and expect more volatility ahead. The S&P 500 index has rallied nearly 19% since hitting a low March 23, though it’s still down 21.5% from the record high it reached in February.
“We shouldn’t over-extrapolate temporary trends,” said Patrick Schaffer, global investment specialist at J.P. Morgan Private Bank.
Such concerns were borne out in Tuesday’s trading, when the S&P 500 swung up and down throughout the day.
“We are still in what you would call the relief rally off of the prior low,” said Sam Stovall, chief investment strategist at CFRA. .
“There’s no guarantee that the worst is behind us, yet traders believe that at least there is some shortterm money to be made,” Stovall said.
The S&P 500 index fell 4.27 points Tuesday to 2,659.41. The Dow Jones industrial average slipped 26.13 points, or 0.1%, to 22,653.86; earlier in the day, it was up as much as 937 points. The Nasdaq composite fell 25.98 points, or 0.3%, to 7,887.26.
Oil prices have been even more volatile than the stock market in recent weeks as demand for energy has dried up amid a global economy weakened by the coronavirus outbreak. Russia and Saudi Arabia have also been locked in a price war, refusing to cut production sharply even as the world is awash in excess oil.
President Trump said last week that he hoped the two sides could agree on cutbacks. On Tuesday, benchmark U.S. crude oil fell $2.45, or 9.4%, to $23.63 a barrel. Brent crude, the international standard, fell $1.18 to $31.87 a barrel.
In a signal that investors are feeling less pessimistic about the economy and inflation, they pushed the 10year Treasury’s yield up to 0.72% from 0.67%.