Stocks Rally, Oil Drops at Start of Challenging Week
April 06 2020 - 12:06PM
Dow Jones News
By Xie Yu and Avantika Chilkoti
Global stocks rallied Monday as investors cheered early signs
that lockdowns in the U.S. and Europe may be helping slow the
coronavirus pandemic, even as Americans brace for a difficult week
with infections likely to peak.
The Dow Jones Industrial Average rose 1,042 points, or 5%, to
22095, although the index is still down more than 20% this
year.
The S&P 500 rose 4.8%, and the Nasdaq Composite gained 4.8%.
The pan-continental Stoxx Europe 600 index gained 3.8%, while most
major Asian equity markets closed higher.
All 11 sectors in the S&P 500 climbed, led by utilities, up
7.1%, and materials, up 6.9%.
Crude futures, however, ticked down as major oil-producing
nations prepare to meet Thursday to discuss how to address the
global glut in supply.
New York, which has been the hardest hit by the coronavirus in
the U.S., on Sunday reported its first decline in deaths a day,
though Gov. Andrew Cuomo cautioned that it was too early to
understand the significance of that number. Health authorities have
warned that new models show the number of cases is likely to reach
a new high in coming days. At least one-quarter of the U.S. economy
has gone idle as authorities curtailed travel and activity, an
analysis conducted for The Wall Street Journal showed.
Strict containment measures also showed signs of helping slow
the spread of the virus in parts of Europe, including Italy and
Spain. Both countries are now recording fewer daily deaths than
they have in over a week, and the pressure on hospitals in Italy is
beginning to ease, officials said.
"A sense of eagerness to see a turn in the spread of the virus
and economic growth is driving the market," said Govinda Finn, an
economist at Aberdeen Standard Investments. However, "I wouldn't
have massive confidence that we are there yet, so I think the rally
probably won't last long," he cautioned.
The yield on 10-year Treasurys rose to 0.659%, up from 0.587%
Friday, in another sign of investors' growing risk appetite. The
market for U.S. government debt, normally the most liquid and
actively traded bond market in the world, has calmed in recent
weeks following a string of extraordinary measures by the Federal
Reserve. Yields rise when bond prices drop.
West Texas Intermediate crude, the U.S. oil benchmark, fell 5%
to $26.92 a barrel. An emergency summit to discuss global
production cuts was pushed back from Monday to later in the week
amid continued tensions between Saudi Arabia and Russia. Investors
are growing increasingly concerned that a failure to cut output may
result in the world running out of storage space for excess crude.
Limiting production may also not be enough to offset the drop in
demand.
"Even if they sort out something on the supply side, it probably
won't be big enough to offset what's happening on the demand side,"
said Lyn Graham-Taylor, a strategist at Rabobank.
In Asia, Australia's benchmark S&P/ASX 200 index closed up
4.3%. Japan's Nikkei 225 rose 4.2%. Markets in mainland China were
closed for a holiday.
Some investors remain cautious about the prospects of a
sustained market rally. Volatility remains high and cross-asset
correlations -- the typical relationship between the price of
different assets -- has broken down, suggesting the market is still
under stress, according to Dwyfor Evans, head of macro-strategy for
the Asia-Pacific region at State Street Global Markets in Hong
Kong.
"We have good days and bad days. Sometimes they follow each
other," Mr. Evans said.
Write to Xie Yu at Yu.Xie@wsj.com and Avantika Chilkoti at
Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
April 06, 2020 11:51 ET (15:51 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.