Stocks Roar, With Dow Spiking 1,300 Points, After Senate Passes $2 Trillion Stimulus Bill

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A dismal unemployment report failed to pop Wall Street’s buoyant mood on Thursday, with stocks running to their third straight day of gains following the federal government’s pledge to shower trillions of dollars on U.S. citizens and commerce.

The Dow Jones industrial average soared 1,351 points, or 6.2 percent, to cap its second best three-day run in history; the top spot occurred in 1931. With Thursday’s close of 22,552.17, the blue chips have bounced 21.3 percent since Monday, though they’re still 23.7 percent from their Feb. 12 high.

The index’s rally has been powered by Boeing, which has seen a resurrection of its stock price this week on word that federal help is on the way. The aerospace giant’s shares jumped 13 percent, to $180 a share. Its shares were trading below $100 on Monday. Chevron, Walgreens Boots Alliance and UnitedHealth Group also paced the Dow’s performance.

“It’s proof that greed isn’t dead, and neither is optimism” said Michael Farr, president of Farr, Miller & Washington, an investment management firm. “Investors are anxious to have the worst behind us, but with 3 million unemployed and the number likely to go higher, it’s premature to say this market has made its lows.”

The Standard & Poor’s 500 index ended up 6.1 percent, 118 points, to close at 2,630,07. The broad index is up more than 15 percent since Monday, its best three days since 1933. The S&P remains 22 percent off its Feb. 19 peak, according to Howard Silverblatt of S&P Dow Jones Indices. The Nasdaq composite jumped 5.6 percent, closing at 7,797.54.

The coronavirus bill the Senate passed Wednesday night is the largest economic intervention in U.S. history. It will provide checks to more than 150 million American households, launch massive loan programs for businesses, and direct spending to unemployment insurance programs, hospitals, localities and more.

The relief cannot come soon enough for those who have already lost jobs and business owners who have closed down. There is near universal agreement that the country’s economic system faces months, if not years, of difficulties. A record 3.3 million Americans applied for unemployment benefits last week, the Labor Department said Thursday.

Some investors have a simple explanation for the market’s big gains this week.

“The easy answer is that this always happens,” said Dan Niles, hedge fund manager of the Satori Fund. “You always see vicious rallies in the midst of bear markets. The best example is the Great Depression, when the S&P rallied eight separate times, on average 24 percent each, on its way to losing 86 percent from peak to trough.”

Silverblatt of S&P Down Jones Indices, said investors are going to have to live with severe fluctuations for months as Wall Street sorts out the financial implications of the coronavirus. “This has been an amazing three days, but remember we are still way down from where we started and the volatility remains.”

The expectation of a breakthrough in the Senate and the scope of the Federal Reserve’s unprecedented intervention had already propelled markets to first back-to-back stock gains in more than a month. On Wednesday, the Dow Jones industrial average climbed 495.64 points, or 2.4 percent, to close at 21,200.55. That extended Tuesday’s massive rally that lifted the Dow 11.4 percent to its best finish in 87 years.

Yet the pandemic, at once an economic nightmare and public health crisis, continues to wreak havoc worldwide. In an interview Thursday morning with NBC’s “Today” show, Fed Chair Jerome Powell said the country “may well be in a recession” already.

“This $2 trillion stimulus package is just round one,” said Chris Brightman, chief investment officer at Research Affiliates, which has more than $130 billion under management. “Debt and deficits will be mind boggling, not just here but around the world. It’s too soon to worry about inflation, but that coming complication can’t be put off forever. Expect extreme market volatility to continue.”

European markets closed up across the board. Britain’s FTSE 100 jumped 2.24 percent, and the German DAX rose 1.3 percent on the day. The benchmark Stoxx 600 index, Europe’s version of the S&P 500, gained 2.55 percent.

The story was different in Asia, where markets posted some of their steepest losses of the past few days. Japan’s Nikkei 225 plummeted 4.51 percent, and Hong Kong’s Hang Seng dropped 0.7 percent. The Shanghai composite fell 0.6 percent.

In his “Today” interview, Powell emphasized that the U.S. economy wasn’t facing a typical downturn as the outbreak pushes people to shutter businesses and withdraw from normal activity. But once the virus is contained and consumer confidence returns, Powell said, “There can also be a good rebound on the other side.”

Until then, the Fed will continue to step in “aggressively and forthrightly, as we have been.”

“When it comes to this lending, we’re not going to run out of ammunition,” Powell said. “That’s not going to happen.”

 (c) 2020, The Washington Post · Rachel Siegel, Thomas Heath 

{Matzav.com}

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