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U.S. stocks closed sharply higher Tuesday, lifted by growing expectations that the worst of the human toll of the COVID-19 pandemic may have passed.
But the economic fallout is only starting to be tallied as first-quarter corporate earnings reporting season kicks off, shedding more light on the business impact of government efforts to slow the spread of the disease.
How did the major indexes fare?
The Dow Jones Industrial Average DJIA, +2.39% rose 558.99 points, or 2.4%, to end at 23,949.76, the S&P 500 index SPX, +3.05% gained 84.43 points, or 3.1%, to close at 2,846.06, and the Nasdaq Composite Index COMP, +3.94% advanced 323.32 points, or 4%, to finish at 8,515.74.
The Nasdaq exited bear-market territory, joining the Dow and S&P 500, after their 20% plunge in March below their recent peaks.
What drove the market?
Ten U.S. states that account for nearly 38% of the U.S. economy began working on plans to reopen for business, Reuters reported, as parts of Europe and the U.S. saw signs of a leveling-off in the number of COVID-19 cases, providing a lift to global equities.
“The market moves are about positive feelings about the trajectory of the virus,” Shawn Cruz, manager of trader strategy at TD Ameritrade, told MarketWatch. “Investors are relieved that we’re having the discussion about planning to open things. It’s looking like sometime in the second half of the year, we’ll return to some sort of normalcy, and markets are pricing that in.”
Amid talk of a May 1 target to reopen parts of the U.S. economy, Dr. Anthony Fauci, the government’s top infectious disease expert, cautioned that the U.S. still doesn’t have the critical testing or tracking procedures needed to get Americans safely back to work.
Since the S&P 500 index’s low on March 23, the index is up 27.2%, with investors heartened by the progress in fighting the pandemic along with unprecedented financial assistance from the Federal Reserve and U.S. government.
Read: Stock market investors are asking the wrong question about coronavirus and the economy, analyst says
Managers of the handful of companies that reported Tuesday morning struck a cautious tone, led by JPMorgan Chase & Co . JPM, -2.74% CEO Jamie Dimon, who said his bank set aside $8.3 billion in provisions for loan losses, up from $1.5 billion last year, a necessity given the likelihood of a fairly severe recession. The bank’s stock traded 2.7% lower Tuesday.
“The next two quarters, to us, are kind of a throwaway,” said Paul Nolte, a portfolio manager at Kingsview Asset Management in Chicago, adding that those earnings won’t relate to the long-run business prospects for many companies.
But Nolte also thinks it will be a slow process getting back to normal. “Even when restaurants are back open again and bans on large gatherings are lifted, it doesn’t mean people are going to rush out.”
The International Monetary Fund’s chief economist warned on Tuesday that global efforts to contain the coronavirus could result in the loss of $9 trillion in economic activity through 2021, making it the worst recession since the Great Depression.
St. Louis Federal Reserve President James Bullard said quarantining could exact a $25 billion daily toll on the U.S. economy and reiterated his call for more testing, rather than quarantining, while speaking at a regional COVID-19 Briefing Series.
Fresh data out of China was upbeat and provided a lifted appetite for equities, analysts said. China’s exports and imports in March continued to drop, but at a slower rate, as the country’s economic activity began to recover from the measures enacted to prevent the pandemic’s spread.
Which companies were in focus?
- Johnson & Johnson JNJ, +4.47% shares rose 4.5% after the drug and consumer products company reported first-quarter profit and sales that topped expectations and boosted its dividend, offsetting a downbeat full-year outlook.
- Home Depot Inc. HD, +4.21% shares advanced 4.2%, which along with gains for Johnson & Johnson and Apple Inc. AAPL, +5.05% shares, led the Dow higher.
- Wells Fargo & Co. WFC, -3.97% shares fell 4% after the bank reported first-quarter profit and revenue that missed expectations, which along with other financials that missed profit and revenue expectations were the biggest drag on the blue-chip Dow.
- Roku Inc. ROKU, +10.32% shares surged 10.3% Tuesday after the platform said it added more new users than expected as COVID-19 swept across the globe in the first quarter of 2020.
- Shares of Boeing Co. BA, -4.29% closed down 4.3% Tuesday after the company said it delivered fewer commercial airplanes in the first quarter than expected.
- Square Inc. SQ, +5.03% shares gained 5%, even though a UBS analysts cut his ratings for the company to neutral from buy on Tuesday, due to “deteriorating spending” during the COVID-19 outbreak, a key risk to the company, especially since Square is heavily reliant on in-store purchases.
- Tesla Inc. TSLA, +9.05% shares jumped 9.1%, adding to a nearly 60% gain in the past seven days as Credit Suisse analysts upgraded the stock to hold from sell and upped their price target to $580 from $415.
- Amazon.com, Inc. AMZN, +5.27% shares rose 5.3%, recovering all their losses since the pandemic, while pushing the e-commerce and cloud computing giant above an $1.1 trillion market cap for the first time ever, according to Dow Jones Market Data.
How did other markets trade?
Government bonds were trading largely unchanged, with the yield on the 10-year U.S. Treasury TMUBMUSD10Y, 0.753% holding at around 0.75%.
Crude oil prices fell Tuesday. West Texas Intermediate Crude for May delivery CLK20, -7.45% lost $2.30, or 10.3%, to finish at $20.11 a barrel on the New York Mercantile Exchange. In precious metals, the price of an ounce of June gold GCM20, -0.29% added $7.50, or 0.4%, to settle at $1,768.90, booking its forth session in a row of gains.
The U.S. dollar fell 0.5% relative to a basket of its peers, according to the U.S. dollar index DXY, -0.49%.
In Europe, stocks finished mixed, with the Stoxx Europe 600 SXXP, +0.63% up 0.6% and the FTSE 100 UKX, -0.87% down 0.9%.
In Asia overnight, stocks rallied — the China CSI 300 000300, +1.93% gained 1.9%, Japan’s Nikkei 225 NIK, +3.12% gained 3.1% and Hong Kong’s Hang Seng index HSI, +0.55% rose 0.6%.
William Watts contributed reporting
