Hope takes the reins on Wall Street, stocks rally worldwide

NEW YORK — In Wall Street’s tug of war between hope and pessimism about the coronavirus pandemic, hope is fighting back.

U.S. stocks joined a worldwide rally Friday and closed out their first back-to-back weekly gain since the market began selling off two months ago. The S&P 500 jumped 2.7% for the day, following up on even bigger gains in Europe and Asia.

Investors latched onto several strands of hope about progress in the fight against the coronavirus. They included the White House’s release of guidelines for states to reopen their economies and a very early but encouraging report on a possible treatment for COVID-19. Those events dovetailed with recent numbers that raised hopes for a leveling off of infections in some of the world’s hotspots.

The gains came even as data piles higher showing the severe economic and human toll of the outbreak. The virus has killed more than 150,000 worldwide and forced the formerly high-flying Chinese economy to shrink a crunching 6.8% last quarter.

A measure of leading economic indicators in the U.S. plunged last month by the most in its 60-year history, the latest in a string of similarly unprecedented data reports.

The S&P 500 rose 75.01 points to 2,874.56. The Dow Jones Industrial Average jumped 704.81, or 3%, to 24,242.49, and the Nasdaq added 117.78, or 1.4%, to 8,650.14.

That’s caused the stock market to cycle up, down and up again, sometimes in the same day, as it tries to set prices now for where corporate profits will be months in the future.

Optimists have been more forceful recently as they point to infections leveling off in some hard-hit areas around the world. That raises the possibility that parts of the economy could reopen — although not tomorrow — and eventually boost profits, which are currently expected to fall by roughly 25% in the second quarter, according to FactSet. Optimists are willing to look through all the economic damage in the near term, which is being mitigated somewhat by massive aid from the Federal Reserve and the U.S. government.

The S&P 500 fell about 33% from it’s all-time high on Feb. 19 to March 23 as the virus moved quickly from Asia to Europe to the U.S., largely shutting down economies as it went. The market has recovered a little more than half of those losses since.

Pessimists say the recent rally for stocks has been overdone and point to the severe pain shocking the health care system and the economy. They say conditions are unlikely to get back to anything approximating “normal” soon. Even the unprecedented aid from the Fed and Congress won’t be nearly enough for households and businesses to weather a protracted downturn.

In a sign of a bit less caution in the market, Treasury yields ticked higher but remain extremely low. The yield on the 10-year Treasury rose to 0.64% from 0.61% late Thursday, though it remains well below the 1.90% level it was near at the start of the year. Bond yields drop when their prices rise, and investors tend to buy Treasurys when they’re worried about the economy.