Stocks are surging again on Wall Street as a massive coronavirus relief bill gets closer to passing Congress. The astonishing rally came even as the massive scale of the downturn slamming the economy becomes more apparent.
The S&P 500 rose 6.2%, bringing its three-day rally to 17.6%. The Dow industrials have risen an even steeper 21.3% since Monday.
Nearly 3.3 million Americans applied for unemployment benefits last week, easily shattering the prior record set in 1982, as layoffs and business shutdowns sweep across the country. The outbreak has happened so suddenly that Thursday’s jobless report is one of the first points of data showing how much economic pain it’s creating.
Analysts said the market shot higher Thursday because Wall Street knew the bad news on unemployment was coming. The gains earlier this week came as Capitol Hill and the Federal Reserve promised an astonishing amount of aid for the economy and markets, hoping to support them as the outbreak causes more businesses to shut down by the day.
“There is no sugar coating these numbers — they are bad,” said Jamie Cox, managing partner for Harris Financial Group. “Markets have had several days to digest what everyone knew was coming; therefore, the market response to these numbers may differ than what people might expect.”
Despite the big gains, the S&P 500 remains 22% below its February high and analysts expect more dire economic headlines, and market turbulence, in the days ahead.
Companies are also expected to report discouraging results in just a few weeks as earnings season begins. Very few have dared to issue forecasts capturing how big a hit the virus will inflict on their profits.
Rising expectations that Congress would approve an unprecedented rescue package for the economy have driven stocks higher this week. Late Wednesday, the Senate unanimously approved the $2.2 trillion plan, which includes direct payments to U.S. households and aid to hard-hit industries. The House of Representatives is expected to approve it Friday.
The prospect of a big financial shot in the arm for businesses and households helped offset some of the concerns about the steep job losses the economy is beginning to see due to the coronavirus.
Investors still need to see stability in banks and, especially, in oil prices to maintain confidence, because markets could be in for another slide if oil goes below $20 a barrel, said Andrew Slimmon, managing director and senior portfolio manager at Morgan Stanley Investment Management.
Benchmark U.S. oil slid 7.7% to settle at $22.60 a barrel. Goldman Sachs has forecast that it will fall well below $20 a barrel in the next two months because storage will be filled to the brim and wells will have to be shut in.
“I wouldn’t necessarily say that where the market was yesterday we won’t see that again,” Slimmon said. “There is bad news still to come.”
Investors say the market needs three main things to slow its breathtaking drop, which has sliced one quarter off the S&P 500 since it set its record last month.
The first is already here after the Federal Reserve has slashed interest rates back to nearly zero and offered to buy an unlimited amount of Treasurys to get lending markets running more smoothly. The second is making progress, as the economic rescue plan moves through Capitol HIll.
The third, though, is getting more concerning by the day: the accelerating spread of the virus.
The United States has more than 69,000 known cases, and the worldwide number of infections has topped a half-million, according to Johns Hopkins University. The death toll has climbed to more than 23,000, while more than 120,000 have recovered.
For most people, the new coronavirus causes mild or moderate symptoms, such as fever and cough that clear up in two to three weeks. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia and death
The yield on the 10-year Treasury fell to 0.83% from 0.85% late Wednesday. It had been as low as 0.77% just before the jobless report was released. Lower yields reflect dimmer expectations for economic growth and greater demand for low-risk assets.
Boeing continued to climb after soaring more than 24% Wednesday in part on expectations that it stands to gain from the Congressional aid package. The aircraft manufacturer was the biggest gainer in the Dow Jones Industrial Average, rising 13.7%.
The Dow was also adding to its gains this week. It rose 6.4%, or 1,351.62 points to 22,552.17. The Nasdaq gained 413.24 points, or 5.6%, to 7,797.54. The benchmark S&P 500 index rose 154.51 points to 2,630.07.
European markets closed broadly higher following a mixed finish for Asian markets.
Despite the solid rally this week, analysts say further big drops are common until there have been enough sustained gains in the market to ease investors' fear of further declines.
"Historically, you do test the bottom one, two, three times before you're convinced it's over and then you build up again toward that viable rally," said Quincy Krosby, chief market strategist at Prudential Financial. “What you have here, obviously, is a concern about how deep the recession is going to be and when are we going to come out.”