Even with the economy still in miserable shape, some investors are finding reasons to hope the worst of the plunge may have passed, and Wall Street rallied to its biggest gain in a week on Thursday.
The S&P 500 climbed 1.2% for its third gain in four days, following up on similar increases in European markets. Other areas of the market were still showing much more pessimism, though, including bonds.
The day’s headliner economic report showed another 3.2 million U.S. workers applied for jobless benefits last week, bringing the total to 33.5 million over the last seven weeks. It’s a shocking number, but it’s also the fifth straight week that it has declined since hitting a peak in late March.
Several companies also cited signs that the worst may have passed in some parts of their businesses, though more weakness is still definitely on the horizon.
That was enough to bolster hopes that have coursed through the stock market recently as investors look ahead to a future that’s not as bad as the horrific present. On Wall Street, investors often care more about how quickly economic pain is increasing than about whether there is more pain.
The S&P 500 rose 32.77 points to 2,881.19.
The Dow Jones Industrial Average gained 211.25, or 0.9%, to 23,875.89.
The Nasdaq rose 125.27, or 1.4%, to 8,979.66 and eliminated the last of its losses for 2020 so far.
“Investors are saying: Look, I know things are bad, tell me something I don’t know,” said Sam Stovall, chief investment strategist at CFRA. “If I know things are going to be horrendous, the only way you can surprise me is to the upside.”
Everyone agrees the world is sliding into a severe recession after economies worldwide shut down in hopes of slowing the spread of the coronavirus. But some countries and U.S. states are laying out plans to relax restrictions, which has some investors focusing on the possible resumption of growth later this year.
Investors on Thursday found solace in numbers from other countries further ahead in reopening their economies, which haven’t shown a renewed surge in COVID-19 cases, said Quincy Krosby, chief market strategist at Prudential Financial.
“Right now, what investors and traders are looking at, not to mention public health officials, is how it is working in other countries,” she said. “When you watch other countries opening and doing it successfully without an uptick in cases, it portends well for the U.S.”
Also helping to boost the market, she said, was a federal regulatory approval for the second phase of testing on a potential COVID-19 vaccine from Moderna.
The S&P 500 has more than halved its 33% loss from February into late March, beginning its rally after the Federal Reserve and Capitol Hill pledged massive amounts of aid for the economy. Many analysts have been skeptical of the rally, saying it’s overdone given how much uncertainty still exists about how long the recession will last.
Lyft jumped 21.7% after it said late Wednesday that ride levels appear to have steadied after hitting a bottom in the second week of April. Over each of the three following weeks, the number of rides has grown from the prior week, though they’re still down more than 70% from a year earlier.
Stocks whose fortunes are most closely tied to the strength of the economy helped lead the market. Energy producers in the S&P 500 rose 2.5% for the biggest gain among the 11 sectors that make up the index. Financial stocks were close behind.
They have been among the market’s hardest-hit stocks this year on worries that the recession is erasing demand for oil and could lead to a wave of loan defaults for banks.
The bond market offered a much more cautious take. The yield on the 10-year Treasury fell to 0.63% from 0.71% late Wednesday. Yields tend to fall as investors downgrade their expectations for economic growth and inflation.
The 10-year yield had climbed strongly a day before after the U.S. government gave an update on how it’s borrowing to help pay for the trillions of dollars it’s pumping into the economy to combat the pandemic.
The yield on the two-year Treasury, meanwhile, fell to a record low on Thursday, according to Tradeweb.
But as recent days have shown, investors remain tentative, worried about what a the new economy will look like, and whether millions of jobs will ever make it back to an incredibly shrinking economy.
China reported a rise in exports as its pandemic lockdown eased.
»TUESDAY’S CLOSE: Stocks end higher on Wall Street even after late-day stumble
As more countries start to remove the draconian limits on business and public life, investors are trying to gauge how soon, how quickly the global economy might bounce back.
The labor market in the United States has been a focal point since the shutdowns began seven weeks ago.
Price of oil
The price of oil pushed higher.
Benchmark U.S. crude surged $2.51 to $26.50a barrel in electronic trading on the New York Mercantile Exchange. It fell 57 cents, or 2.3%, to $23.99 a barrel Wednesday.
Brent crude oil, the international standard, gained $1.98 to $31.70 a barrel.
What’s next
On Friday, a monthly report is expected to show that the unemployment rate jumped to at least 16% in April — from just 4.4% in March.
Friction with China
Chinese trade data show China’s exports to the United States rose to an encouraging 3.5% in April, driven by electronics shipments and textiles, which included a surge in mask exports.
On the other hand, imports of American goods fell 11% in a reflection of weak Chinese industrial and consumer demand despite the lifting of most anti-virus controls.
Imports fell 13.7% from a year earlier to $179.6 billion, worse than the first quarter’s 2.9% decline. But total exports rose to $200.3 billion, a turnaround from the 13.3% contraction in the three months ending in March.
Forecasters warned that strength is unlikely to last as the coronavirus pandemic depresses global consumer demand.
Comments by President Donald Trump raising the possibility of further trade friction with Beijing have worried investors hoping for better times as other economies begin to reopen from pandemic shutdowns.
Trump said he would soon assess progress in a preliminary trade agreement with China that took effect in January, extending a truce in a painful tariffs war between the world’s two biggest economies.
The possibility of revived friction over trade at a time when economies have been slammed by the pandemic and resulting travel restrictions has rattled investors in Asia, where China is the main driver for regional growth.
“President Trump’s latest threat to impose additional tariffs on China could also bring some front-loading exports in the near term," Wang said.
Europe
In Europe, gains were widespread for stocks. France’s CAC 40 rose 1.5%, and Germany’s DAX returned 1.4%. The FTSE 100 in London added 1.4%.
Encouraging data showed a 3.5% rise in exports for China in April, driven by electronics shipments and textiles, which included a surge in mask exports. Forecasters warned the strength is unlikely to last, though, as the coronavirus pandemic depresses global consumer demand.
Asian markets
Most Asian markets slipped Thursday, but Japan’s benchmark Nikkei 225, reopening after Golden Week holidays, gained 0.3% to finish at 19,674.77.
South Korea’s Kospi was little changed, inching down less than 0.1% to 1,928.61. Australia’s S&P/ASX 200 lost 0.4% to 5,364.20. Hong Kong’s Hang Seng fell 0.7% to 23,980.63, while the Shanghai Composite fell 0.2% to 2,871.52.
— Compiled and edited by ArLuther Lee for The Atlanta Journal-Constitution.
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