Dow pops nearly 700 points following worst sell-off since March
Wall Street is back in buying mode, with the Dow Jones industrial average jumping nearly 700 points at the open, after a reality-check sell-off lopped 6.9% from the blue-chip index.
A steady rise in covid-19 cases and a sobering economic outlook from the Federal Reserve - which predicts unemployment will still be at 9.3% by year's end - sparked a massive sell-off Thursday that sent the Standard & Poor's 500 skidding 5.9% and the tech-heavy Nasdaq tumbling 5.3%. The drubbing capped a three-day losing streak that erased 9% from the Dow.
The Dow jumped 680 points, or 2.7%, on Friday before retreating slightly. The Standard & Poor's 500 and Nasdaq Composite indexes each climbed more than 2.3%.
"Forecasts haven't worried investors for now and we'll need to see dramatically bigger spikes in new cases for states to even consider tightening lockdown measures again," Craig Erlam, an analyst with OANDA, wrote in comments emailed Friday to The Washington Post. "This feels like more of an excuse to take some profit in a market that has bounced back remarkably to the point that there's a huge disconnect between stock markets and economic reality."
The United States surpassed 2 million coronavirus cases on Thursday, a sobering tally that far exceeds the number of infections reported in any other country. Eleven states reached their highest seven-day rolling averages of new cases on Thursday, according to data tracked by The Post, suggesting a second wave could already be in motion.
President Donald Trump and his top economic aides fanned out Thursday to try to beat back the growing concern. They assailed the Fed's projection that unemployment will remain elevated well into next year. The Trump administration also pushed back on the idea that it would allow the economy to shut down again in the face of rising cases, but Treasury Secretary Steven Mnuchin told reporters the administration is seriously considering a second round of stimulus payments.
Grim economic data poured in from around the globe this week, illustrating the depths of economic damage and indicating that the road to recovery will likely be rockier than many hoped. The United Kingdom reported its gross domestic product declined 20.4% in April - the largest drop on record; the Organization for Economic Development and Cooperation has warned the U.K. its economy will likely to be among the hardest hit, along with Spain and Italy. Germany's industrial production took its biggest hit ever in April, prompting some economists to call it the country's worst month ever for the economy. The World Bank said the pandemic has created the biggest global recession since World War II and predicted GDP will contract 5.2% this year.
Yet in early trading Friday, companies that have been walloped by the pandemic saw their stocks rise: both Carnival Corp. and United Airlines climbed more than 11%. American Airlines rose more than 12% after it reported seeing positive net bookings since mid-May. Aerospace giant Boeing rebounded more than 7% after shedding more than 10% Thursday.
The past three months have been "a dizzying Space Mountain-like rollercoaster for investors," Wedbush Securities tech analyst Dan Ives said in comments emailed to The Post. "Yet, the stock market has come roaring back in a V shaped recovery."
The yield on the 10-year U.S. Treasury note ticked upward after a major drop Thursday as investors moved toward riskier ground. Bond yields rise as prices fall.
Oil markets also erased some of their losses after plummeting 8% Thursday as economic fears collided with a report from the U.S. Energy Information Administration indicating demand recovery may have stalled. Brent crude, the international oil benchmark, inched up .86% to trade at $38.88 a barrel. West Texas Intermediate crude, the U.S. oil benchmark, climbed .6% to $36.56.
