Dow surges 1,600 points even as U.S. braces for 'hardest and saddest' week of the pandemic

The Dow Jones industrial average, the Standard & Poor's 500 index and the Nasdaq composite all skyrocketed more than 7% Monday even as the number of U.S. coronavirus deaths passed 10,000. New York City hospitals were stretched to their maximum and British Prime Minister Boris Johnson entered intensive care. Analysts latched onto some positive morsels of good news that may indicate the disease is peaking in the U.S.

The Dow closed up 1,600 points, or 7.7%. 

"Today is very understandable," said David Bahnsen, chief investment officer of the Bahnsen Group, a private wealth firm based in Newport Beach, California, that manages $2.3 billion. "The market is a forward looking discounting mechanism. And if you worry at the doomsday side of the health models, you get a Dow dropping to 18,000. The better case models have the Dow at 25,000.

"Right now, we are sitting in the middle of those outcomes," Bahnsen said. "The idea that three weeks or three months from now we will be in a worst-case scenario in the health crisis is dissipating. There isn't a single data point that says otherwise. We are talking about medical supplies, hospital capacity, numbers of diagnoses, numbers of deaths. Spain is bending their curve. California's numbers are not moving. The market is anticipating that social distancing works."

South Korea is recording encouragingly low numbers of new cases, and China's powerful economy is coming back online. New York, the epicenter of the U.S. outbreak, reported its first daily decline in coronavirus deaths Monday. Still, losses are mounting across the United States, where covid-19 deaths surpassed 9,500 over the weekend. Unemployment has skyrocketed, with nearly 10 million Americans filing jobless claims in two weeks.

Despite the economic fallout, the pandemic is a public health crisis first and foremost, and traders are applauding data that suggests an eventual return to normalcy, said

Jeffrey Kleintop, chief global investment strategist at Charles Schwab, applauded the data that says the country will some day return to normal life.

"Investors have a choice," said Kleintop said. "Do they want to focus on the economic freefall in the U.S. and Europe, or do they want to focus on the recovery that's underway in Asia?"

Monday's surge marked a significant turnaround from Friday, when Wall Street stumbled out of another volatile week. The three major U.S. indexes shed at least 1.5% on the day - after the Labor Department announced 701,000 jobs were lost in March, driving the jobless rate up to 4.4% - and have lost more than a quarter of their value since hitting all-time highs in February. It was the third week out of four that they ended in the red.

"The market is entirely focusing on a relief rally based on the near-term event, which is the health crisis," said Wayne Wicker. "I don't think it's really focused that much on some of the challenges ahead for getting the economy back on track."

"Monday makes no sense to me and I am selling," said Michael Farr of Farr, Miller & Washington firm. "We are paying attention to disease news and are not looking past it to economic data. Nobody has gotten hired in the past week. Estimates are as high as 50 million unemployed. Those 50 million aren't going to have paychecks to spend."

Japan's Nikkei 225 climbed more than 4.2% even with the nation expected to announce a state of emergency due to the virus and Hong Kong's Hang Seng closing up 2.2%. European markets were up across the board, with the benchmark Stoxx 600 index up nearly 3% in midday trading. Britain's FTSE 100 rose more than 2% despite Prime Minister Boris Johnson's hospitalization from the novel coronavirus.

The economic devastation in the United States continues to grow, as the virus birthed a recession that is overwhelming unemployment offices with jobless claims that span most American industries. The Wall Street Journal estimates more than one-quarter of the U.S. economy has been idled by the pandemic.

"A virus that shut down the economy causing a recession is unprecedented in modern history," Nancy Tengler, chief investment officer of Laffer Tengler investments, wrote in commentary. "The rapidity of the decline reminds [me] of 1987. The potential for recession reminds many of 2008-2009. Still, it is too soon to tell."

Businesses and households are now waiting for waves of government stimulus, which already has equaled 10% of U.S. gross domestic product, to flow in. Many small-business owners are reporting major delays in securing loans, without which many will close their doors. The Internal Revenue Service has warned the $1,200 relief checks may not reach many Americans until August or September if they haven't already provided direct-deposit information to the government.

Oil fell as investors looked toward an emergency summit to address the ballooning global oil supply, another consequence of the pandemic. Brent crude, the global oil benchmark, declined more than 2.3% to trade at $33.30 a barrel. Tensions between Russia and Saudi Arabia have strained discussions about production cuts as demand weakens.

Ten-year U.S. Treasury yields rose slightly in early trading to .05, suggesting investor confidence is on the rise. Yields rise when prices drop, as investors move toward riskier ground. But gold, another safe-haven, was also trading up 1.5% to $25.20 per ounce.

The full scope of the economy's losses will be clearer after the upcoming wave of first-quarter earnings reports. Sixty-four percent of the S&P 500's sectors are projected be in the red, according to commentary from Sam Stovall of CFRA Research, while airlines, copper, department stores and leisure products are projected to post greater than 100% declines in earnings per share.

"Investors are advised to fasten their safety belts," Stovall wrote, "because it's likely to be a bumpy quarter."