Stocks post gains even after late-day stumble
Stocks on Wall Street closed broadly higher Tuesday as more countries relaxed restrictions on businesses, raising hopes for a recovery from the historic plunge that is sweeping the global economy.
The Standard & Poor’s 500 index closed up 0.9%, although it lost about half of its early gains in a late-in-the-session burst of selling. Technology and healthcare stocks accounted for much of the gains, which followed a strong showing in overseas markets.
Investors are cautiously optimistic that the gradual reopening of some businesses will begin to turn around the economy.
In California, some retail businesses could begin serving customers again as early as Friday, under some restrictions. Many European countries have also begun relaxing strict orders meant to slow the spread of the coronavirus outbreak, while waiting to see if it leads to a resurgence in infections. In Asia, the first pitches of the South Korean baseball season thwacked into catchers’ mitts, albeit in stadiums with no fans in attendance.
Los Angeles County reported 58 new COVID-19 related deaths, bringing the total to more than 1,300. Roughly 1,638 new cases were confirmed.
Expectations for stronger demand for oil as more businesses get the green light to open helped drive the price of oil sharply higher, extending its mini-rally after it fell to record lows last month.
“It’s investors getting a little bit ahead of themselves,” said Willie Delwiche, investment strategist at Baird. “Maybe it’s a sense of relief that we’ve made it this far and there’s some sort of a path forward, even if it’s not real clear.”
Delwiche noted that questions remain about the pace at which people will venture out of their homes and spend money as businesses reopen.
The S&P 500 index rose 25.70 points to 2,868.44. The Dow Jones industrial average rose 133.33 points, or 0.6%, to 23,883.09. The Nasdaq climbed 98.41 points, or 1.1%, to 8,809.12. The Russell 2000 index of smaller-company stocks advanced 9.54 points, or 0.8%, to 1,273.51.
The stock market has been rallying since late March as investors look beyond the devastation that’s ravaging the global economy. They’re focusing instead on the prospects for a resumption of growth later in the year, as well as on the massive support for markets provided by the Federal Reserve. Many analysts are skeptical of the stock market’s rally, saying it’s overdone given all the uncertainty about how long the recession will last, but the S&P 500 has nevertheless more than halved its losses from its sell-off earlier in the year.
A report released Tuesday showed that the U.S. services industry last month shrank for the first time in a decade, but that caused barely a ripple in the stock or bond market. The data weren’t quite as terrible as economists had forecast.
”What we should be watching for is not that things are good; things are not going to be good,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “We should be watching for signs that things are less bad.”
”Just getting people back to work and businesses open again can improve attitudes and confidence,” he said.
Walt Disney Co. fell 3% in extended trading after the company reported a steep drop in quarterly profit as many segments of its media and entertainment offerings ground to a standstill during the coronavirus pandemic. Overall, Disney said costs related to COVID-19 cut its pretax profit by $1.4 billion.
Hopes that the reopening of economies will eventually lead to a pickup in demand have also very recently helped oil prices climb off the floor. U.S. oil to be delivered in June jumped 20.5% to settle at $24.56 a barrel Tuesday, up from a low of $6.50 late last month. That’s still well below the roughly $60 a barrel it cost at the start of the year: The price plunged on worries that the collapse in oil demand would lead to topped-off storage tanks.
Brent crude, the standard for international pricing, rose 13.9% to $30.97 per barrel.
“The feeling on the floor is that energy is in a better spot, and while it’s not brilliant,“ the gulf between oil supplies and demand “is starting to shift in a more positive direction,” Chris Weston of Pepperstone said in a report.
Technology stocks continued their strong run. Apple rose 1.5%. Microsoft gained 1.1%. The two companies alone account for 11% of the S&P 500’s entire market value. Tech stocks in the S&P 500 have nearly erased all their losses for 2020, after earlier being down as much as 23%. The sector is now down 0.3%.
In Europe, Germany’s DAX rose 2.5%, the CAC 40 in Paris gained 2.4% and the FTSE 100 in London rose 1.7%.
Hong Kong’s Hang Seng index added 1.1% as the government said it would relax some social distancing measures, allowing certain businesses such as gyms, cinemas and beauty salons to reopen and doubling the number of individuals allowed at public gatherings to a maximum of eight. Markets in Tokyo, Shanghai and Seoul were closed for holidays.
In another sign of a bit less pessimism in the market, the yield on the 10-year Treasury note ticked up to 0.66% from 0.63%. Treasury yields tend to rise when investors are upgrading their expectations for the economy and inflation. But it’s still well below the 1.90% it yielded at the start of the year.
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