THURSDAY, March 28, 2024
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Stocks rally as momentum builds to restart economy

Stocks rally as momentum builds to restart economy

Stocks staged a robust rally Tuesday as U.S. officials begin to map how they will breathe new life into a U.S. economy wrecked by the coronavirus lockdown.

The Dow Jones industrial average gained 559 points, a 2.4% climb, as investors were cheered by growing talk from governors and federal officials laying out a path for businesses to open and people to return to work. The blue chip index closed the day at 23,949.76.

The Standard & Poor's 500 index and the Nasdaq composite showed gains of 3% and 4%, respectively, results that overshadowed the first day of what is expected to be abysmal first-quarter earnings season. Even a prediction by the International Monetary Fund that a 2020 recession that will be the worst since the 1930s failed to dampen the biggest rally in a month.

The S&P closed at 2,846.06, up 84 points, or 3%. The Nasdaq Composite rose nearly 4% to finish at 8,515.74, a gain of 323 points on the day.

"Today's rally is a combination of factors, including good news on the virus, more evidence that the small business loans are getting through to where they are supposed to go and comfort in the market that all this relief - the CARES Act, the Federal Reserve's actions and additional stimulus expected from Congress - is sufficient to bridge the gap to when we are back to some semblance of normal," said Liz Ann Sonders, chief investment strategist at Charles Schwab.

Ten of the 11 stock market sectors were positive Tuesday, with technology among the top performers on the backs of Apple, Adobe and Microsoft. Energy was the lone holdout as profits have been decimated due to a drop of more than 60% in oil prices since January. Apple, Johnson & Johnson, Microsoft and Home Depot also paced the Dow.

The S&P 500 is up 27.2% from its March 23 low, but it is still 16% off its all-time high on Feb. 19. The broad index is down about 12 percent so far in 2020, but has gone up in three of the last four sessions. The Dow is down 16% this year. The technology-laden Nasdaq is down 5% year-to-date. All three indexes are way off their March lows after Congress and the Federal Reserve intervened with trillions of dollars in relief for the damaged U.S. economy.

"There's a lot more optimism in the market than there was two weeks ago," said Howard Silverblatt of S&P Dow Jones Indices.

Asian markets finished strong, with Japan's Nikkei 225 closing at a 3% gain. European markets were mixed as the hard-hit continent continues to muddle its way through the pandemic.

The feel-good vibe flowed through markets after Monday news conferences by several governors who announced initial steps to reopen their states to business. The lockdown has shuttered most of the nation's population in homes, devastating the economy and overnight throwing nearly 20 million people into unemployment lines.

New York Gov. Andrew Cuomo, a Democrat, on Monday was joined via phone by governors from Connecticut, Delaware, New Jersey, Pennsylvania and Rhode Island as they formed a pact to coordinate an eventual end to their states' restrictions. Later, Cuomo announced that Massachusetts, led by Gov. Charlie Baker, a Republican, was joining the group.

"Everyone is very anxious to get out of the house, get to work and get the economy moving. Everyone agrees with that, but the art form here is going to be doing that smartly, doing that productively, and doing that in a coordinated way," Cuomo said.

"This has to be informed by experts and by data," he added. "You take one step forward, you see how it works, and then you measure the next step."

The governors of California, Oregon and Washington also announced a pact to work together to control the outbreak and carefully restart the economy in their states.

The U.S. has the most documented coronavirus cases, with nearly 600,000 people infected. Confirmed deaths in the nation have surpassed 25,000.

Stocks also got a push Tuesday after health firm Johnson & Johnson beat estimates and announced a 6.3% increase in its dividend, while also lowering full-year guidance because of the coronavirus. The company's shares were trading up more than 4% Tuesday.

Shares of closely followed JPMorgan Chase were down more than 3% by midday after the bank said its revenue held up in the first quarter even though its profit took a big hit.

The bank's chief executive, Jamie Dimon, one of the most respected voices in global finance, said Tuesday that U.S. businesses will likely begin returning employees to their offices by June and continue in phases through July and August.

"A rational plan to get back to work is a good thing to do," Dimon said in a call with analysts Tuesday. "But it won't be May."

Many analysts said they feel that the mere semblance of hope that the coronavirus spread is starting to ebb and that the country is taking its first steps toward getting back on its feet has justified that recent stock market lift.

Sonders said she believes the recent stock rally has support, "but my fear is that the market may be pricing in too rosy a scenario. What if things don't go perfectly, if we open up the economy before the virus is under control, if people's change in behavior is longer lasting that what the optimists hope for?"

 

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