Wall Street closed out its best week in 45 years on Thursday after the Federal Reserve launched its latest titanic effort to support the economy through the coronavirus outbreak.
The central bank announced programs to provide up to $2.3 trillion in loans to households, local governments and businesses as the country tips into what economists say may be the worst recession in decades. It’s the latest unprecedented move by the Fed, which has rushed to ensure cash gets to parts of the economy that need it after markets got snarled by a rush of investors pulling cash out of the system.
The stock market is not the economy, and that distinction has become even more clear this week. The S&P 500 rose 1.4% Thursday, the same day the government announced 6.6 million Americans applied for unemployment benefits last week as layoffs sweep the nation. For the week, the S&P 500 jumped 12.1%, its best performance since late 1974. Markets will be closed for Good Friday.
The S&P 500 rose 39.84 points to 2,789.92. The Dow Jones Industrial Average added 285.80, or 1.2%, to 23,719.37, and the Nasdaq climbed 62.67, or 0.8%, to 8,153.58.
Stock investors are continuously looking ahead to where the economy will be a few months or more in the future. From mid-February through late March, they sent stocks down by a third on expectations that a steep recession was imminent, before the economy really began to crunch.
In the last few weeks, though, investors have sent the market back up nearly 25% following promises for massive aid from the Fed, other central banks and governments around the world, even as evidence piles up that the recession fears were prescient. This week, some investors have begun to look ahead to the economy possibly reopening amid signs the outbreak may be peaking or plateauing in several of the world’s hardest hit areas.
”The market is solely focused on the number of cases,” said Quincy Krosby, chief market strategist at Prudential Financial. “The question is when can the restrictions be lifted? That’s what the market is focused on, when does America open up for business again?”
U.S. stocks rose sharply at the opening bell Thursday following a Labor Department report that an additional 6.6 million U.S. workers filed for unemployment last week.
The jobless claims were still a shocking number after a near-record 10 million people applied for benefits in the previous two weeks because of business shutdowns from the coronavirus.
The Fed program will include aid to small business and state and local governments, according to Bloomberg.
Wall Street has mostly been shaking off other bad signs as the virus may be peaking in hard-hit areas around the world. Just yesterday the World Trade Organization predicted global trade will plunge by up to a third in 2020 due to the pandemic, but stocks surged early and grew further as the White House continued to develop plans that investors hope will turn out to be the ultimate end-game to the prolonged economic crisis.
Stock markets pushed higher in Europe and Asia on Thursday on hopes that the pandemic was reaching a peak in some economies, while the price of oil rose as major crude-producing countries prepared to discuss output cuts.
Benchmarks rose in Frankfurt, London and Hong Kong and ended flat in Tokyo, with investors seemingly reassured by signs that coronavirus deaths and infections may be nearing a plateau in some of the world’s hardest-hit areas.
The optimism helped to temper concern over increasingly gloomy data on unemployment as companies shutter and shed staff in many parts of the world.
Germany’s DAX advanced 0.4% to 10,372 while the CAC 40 in France shed 0.4% to 4,424. Britain’s FTSE 100 picked up 0.7% to 5,719. U.S. shares looked set for gains, with the future for the S&P 500 up 0.4% and that for the Dow industrials gaining 0.2%.
Japan’s Nikkei 225 index was nearly unchanged, ending at 19,345.77, after the central bank governor said the economy faces “extremely high” uncertainty over the likely impact of the pandemic.
That uncertainty was heightened by disagreement between leaders over just how quickly and far to extend precautions meant to contain a surge in coronavirus infections.
The governor of Aichi, home to Toyota Motor Corp.'s headquarters and a prefecture not covered by a declared state of emergency for Tokyo and six other areas, has asked that it also be included. The region has reported dozens of police officers falling sick from the coronavirus.
Elsewhere in Asia, markets were mostly higher. Hong Kong’s Hang Seng added 1.4% to 24,300.33 and the Shanghai Composite index gained 0.4% to 2,825.90. In Australia, the S&P/ASX 200 jumped 3.5% to 5,387.30 and South Korea’s Kospi climbed 1.6% to 1,836.21. India's Sensex surged 3.3% to 30,884.46.
Recent upward swings in markets have dwarfed declines amid signs that deaths and infections may be nearing a peak or plateau in some of the world’s hardest-hit areas.
That's led some investors to begin looking to the other side of the economic shutdown that is gripping the world as authorities try to slow the spread of the coronavirus. The S&P 500 has jumped nearly 23% in the last two and a half weeks, building on earlier gains driven by massive amounts of aid promised by governments and central banks for the economy and markets.
“Risk assets continued to rally on the perception that the global economy will open up again quicker than expected," Stephen Innes of AxiCorp said in a commentary.
The prospect for progress in talks among oil producers has also driven gains, he noted.
“The icing on the cake, ... a ‘good’ outcome for oil prices from the OPEC+ meeting, would be a global agreement to cut output ... beyond OPEC and Russia, although demand concerns will persist,” Innes said.
Oil prices have been even more volatile than stocks recently as Russia and Saudi Arabia bicker over production levels as demand withers. Oil producers are set to discuss an output cut on Thursday, and an announcement for production cuts to prop up the price of crude is possible.
Benchmark U.S. crude oil rose $1.60 to $26.69 per barrel in electronic trading on the New York Mercantile Exchange early Thursday. It gained $1.46, or 6.2%, to settle at $25.09 a barrel on Wednesday, recovering some of its 9.4% slide from the day before.
Brent crude oil, the international standard, rose $1.34 to $34.18 per barrel. It gained 97 cents, or 3%, to $32.84 a barrel in London.
In currency trading, the dollar fetched 108.82 Japanese yen, down from 108.84 yen on Wednesday. The euro sold for $1.0863, strengthening from $1.0856.
Treasury yields, which have signaled worries about the economic damage from the coronavirus outbreak earlier than the stock market, were relatively steady. The yield on the 10-year Treasury was at 0.73%, from 0.76% late Wednesday.
— ArLuther Lee contributed to this report for The Atlanta Journal-Constitution.
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