By Xie Yu, Anna Hirtenstein and Caitlin McCabe
U.S. stocks climbed Tuesday but pared earlier gains, buoyed by
indications that the spread of the coronavirus pandemic was slowing
in some hot spots around the world.
The Dow Jones Industrial Average rose 190 points, or 0.8% in
afternoon trading, after rising more than 930 points earlier in the
session. The S&P 500 and the Nasdaq Composite also jumped,
climbing 0.7% and 0.2%, respectively. All three indexes are
attempting to rally for the third time in four sessions, though
they remain down about 20% from their mid-February highs.
Small signs of success from global social distancing measures
drove the market higher. In New York, Gov. Andrew Cuomo said
Tuesday that the state has projected that it is reaching a plateau
of daily hospitalizations. Globally, countries including Spain and
Iran have seen the daily toll of new infections and deaths flatten.
Wuhan, the Chinese city where the virus was first detected,
prepared to lift its travel ban at midnight Tuesday.
"It's hard to reject the view that things are improving," said
Paul O'Connor, head of multiasset at Janus Henderson. "Markets have
been celebrating this in the last couple of days."
Still, the trends are preliminary and authorities have warned
that the coronavirus infections in the U.S. and U.K. are likely to
worsen in the coming week. Even as intubations and demand for
intensive care units have decreased in New York, Mr. Cuomo said
Tuesday that the state reported its highest number of deaths in a
single day. So far, nearly 5,500 people have died from the virus in
the state, a large portion of the nearly 12,000 deaths across the
country.
Even more, economic indicators have shown that a deep recession
may be looming. The Mortgage Bankers Association said Tuesday that
mortgage forbearance requests surged in the second half of March as
millions of Americans sought unemployment benefits after the
pandemic shuttered businesses.
Plenty of investors remained skeptical about the recent
rally.
Ken Moraif, founder of Retirement Planners of America, said he
doesn't believe a small drop in daily infections bodes well for the
overall economy. He said his company, which had $4.5 billion in
assets under management at the end of 2019, has sold all equity and
bond positions, opting instead for cash.
"I'm having difficulty in understanding how a small business
that has gone bankrupt is going to go back into business because we
have reached the peak of infections," Mr. Moraif said.
"I just think this is slowly degrading like the Titanic, and the
people who are buying right now don't believe how bad this really
is," he continued.
Markets have swung sharply in recent weeks as investors have
tried to make sense of a fast-spreading pandemic that has warranted
unprecedented responses by the Federal Reserve and U.S. government.
If the Dow closes up or down more than 1% Tuesday, it would extend
the streak of such moves to 13 sessions.
The energy and materials sectors led the gains in the S&P
500. Travel and leisure stocks were again among the best
performers. American Airlines Group rose 9.5%, JetBlue Airways
jumped 14%, and United Airlines added 1.5%.
Among cruise stocks, Royal Caribbean Cruises gained 12%,
Carnival jumped 11%, and Norwegian Cruise Line Holdings rose 6.3%.
All six stocks remain down more than 50% for the year.
Meanwhile, in London, EasyJet soared 20% after the carrier
tapped a U.K. government-aid program for short-term credit. The
company's ability to access the funding suggests that it could
withstand the economic downturn, provided that the spread of the
coronavirus continues to slow, according to Michael Hewson, chief
market analyst at brokerage CMC Markets.
"Markets are pricing in a return to normality for airlines
sooner rather than later," Mr. Hewson said.
Investor optimism Tuesday came even after global leaders and
corporate executives warned that a U.S. recession could be deep and
severe. Former Federal Reserve Chair Janet Yellen said Monday in an
interview on CNBC that she expects the U.S. economy to decline at
least 30% in the second quarter. She also said she was "afraid we
will see bankruptcies" and that "companies may end up with debt
burdens that make them unwilling to restore investment spending or
re-hire workers."
Additionally, JPMorgan Chase Chief Executive James Dimon said in
his annual letter Monday that he expects a "bad recession."
Investor appetite for risk Tuesday prompted some investors to
sell the safest government bonds. The yield on the 10-year U.S.
Treasury note rose to 0.738%, from 0.675% Monday. Yields rise as
bond prices fall.
In currency markets, the ICE Dollar Index slipped 0.7%. The
greenback has been wavering amid renewed risk appetite, according
to Jordan Rochester, a currency strategist at Nomura.
Meanwhile, oil prices fell after starting the day higher. Brent
crude, the global gauge of oil prices, slid 3.2% to $32.01 a barrel
as demand for oil has fallen during the pandemic.
Beyond the U.S., the pan-continental Stoxx Europe 600 ended the
day higher, rising 1.9%. Japan's Nikkei 225 and China's Shanghai
Composite both rose more than 2%.
"People are trying to identify risks and opportunities now,"
said Bruce Pang, head of macro and strategy research at China
Renaissance Securities. The outbreak's arc in China shows that the
new coronavirus and measures to contain it would lead to slower
growth, rising unemployment, sluggish demand, disrupted supply
chains and more defaults, he cautioned.
At the same time, "China's case shows when new infections peaked
out, the market would bottom out," and this is what global
investors now expect, Mr. Pang added.
Write to Xie Yu at Yu.Xie@wsj.com, Anna Hirtenstein at
anna.hirtenstein@wsj.com and Caitlin McCabe at
caitlin.mccabe@wsj.com
(END) Dow Jones Newswires
April 07, 2020 15:24 ET (19:24 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.