Friday, July 10, 2020

Wall Street closing in on best quarter since 1998

Jul 01. 2020
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By The Washington Post · Thomas Heath, Hamza Shaban · NATIONAL, BUSINESS, US-GLOBAL-MARKETS 

Stocks overcame weeks of uncertainty, social unrest and a resurgence in coronavirus infections to finish one of Wall Street's best quarters in history.

Two of the three major stock indexes are still down for the first six months of the year, and Federal Reserve chairman Jerome Powell on Tuesday cautioned that the economic recovery remains "extraordinarily uncertain" in the face of the stubborn coronavirus.

But indexes have rebounded from their March lows as investors placed their faith and money on the transformative power of remote technology and on their belief that a slow-but-sure broad recovery - backed by trillions in federal guarantees - is in the works.

The Dow Jones industrial average jumped nearly 300 points, or 1.1 percent, as the session came to a close. The Dow sealed a 16 percent comeback in the second quarter, leaving the blue chips 10 percent short of break even for the year. Apple, Home Depot, Dow and Microsoft muscled the index higher in the quarter.

"The second quarter revival was like Lazarus coming back from the dead," said Howard Silverblatt of S&P Dow Jones Indices.

The Standard & Poor's 500 index jumped 1.5 percent on Tuesday to cap its best quarter since the fourth quarter of 1998 - in the midst of the dot-com bubble - with a 19 percent gain. Energy, technology and discretionary spending - all industries that are tied to a broad economic recovery - led the S&P for the quarter. The index closed Tuesday at 3,100.23 and is down 4 percent on the year.

The Nasdaq - led by a handful of technology powerhouses - is up more than 11 percent on the year. Stay-at-home stocks like Zoom, payments firm PayPal Holdings, online marketplace MercadoLibre and the electric carmaker Tesla lifted the Nasdaq to a 30 percent gain in the second quarter.

The comeback follows a swift and frightening economic freeze caused by a plague that swept through the globe, closing countries, demolishing economies and killing hundreds of thousands.

The broad S&P plunged 31 percent for the year on March 23 after states shut down, telling people to stay inside, putting nearly 30 million Americans out of work, grounding airlines, closing schools, sports and businesses and bringing commerce to a standstill.

Much of Wall Street believes the economy bottomed in April, followed by positive economic news has filtered up in May and June. Personal incomes rose by 10.5 percent, thanks largely to federal stimulus checks. First-time unemployment filings have leveled off. As more drivers took to the roads, the price of oil doubled in June, aiding a crucial industry that supports millions of jobs. The housing market is on the rise, thanks to record-low interest rates. Early in June, a closely-watched report on private payrolls showed 2.8 million jobs lost in May, far fewer than the nearly 9 million experts had predicted. The next private payroll report is due out on Thursday.

"The Great Recession of 2020 may go down in history as the deepest but shortest recession," said Kristina Hooper, chief global market strategist at Invesco.

Analysts said that the quarterly 401(k) retirement plan statements that will be mailed to tens of millions of participants in the next few weeks will show the big stock gains, which could instill confidence in consumers and cause them to feel more comfortable about spending. But much could still go wrong with the economy if the virus spreads and causes more economic slowing or even contraction.

"Many investors lived through 2008 and 2009, and learned from that experience the swiftness with which markets can rebound," said Nicole Tanenbaum of Chequers Financial Management. "Those investors were rewarded for staying the course, and when they open their 401(k) statements later this month and see green numbers, they will again feel justified."

Most investors have sat tight through the turmoil. From mid-February through the end of May, fewer that 1 percent of Vanguard's household and retirement plan participants abandoned equities for safer harbors, according to Vanguard, which has $5.7 trillion under management.

"Very few people panicked," said Vanguard senior investment strategist Jean Young. "And of those that traded, two-thirds bought equities instead of selling. Vanguard investors largely stayed the course."

Fidelity Investments said its most recent data covering January through early May show only a tiny number of individual investors in retirement plans sold out of stocks.

"Despite some significant market volatility earlier this year, most of our retirement savers stuck to their long-term savings plan," said Fidelity spokesperson Mike Shamrell.


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