By Caitlin McCabe, Anna Isaac and Frances Yoon
U.S. stocks surged Wednesday, climbing to levels not seen since
early March, on optimism that economic activity is gathering steam
and authorities may offer more stimulus to bolster the
recovery.
The Dow Jones Industrial Average rose 553.16 points, or 2.2%, to
25548.27 -- marking the first time since early March that the
blue-chip index has closed above the 25000 mark. The index was
powered by gains in American Express, Goldman Sachs and JPMorgan
Chase, all of which climbed more than 5%.
The S&P 500, meanwhile, surpassed 3000 for the first time in
nearly three months. The benchmark index rose 44.36 points, or
1.5%, to 3036.13.
Economically sensitive cyclical stocks, including those in the
financials and industrials sectors, have been staging a comeback
over the past week, erasing some of the punishing losses they
suffered during the coronavirus pandemic.
Shares of retailers, which similarly were battered by widespread
stay-at-home orders, also lifted indexes. Nordstrom gained 17% and
Gap jumped 19%, ranking among the biggest gainers in the S&P
500.
Stocks have been buoyed in recent days by signs that the White
House and Congress are considering more measures to blunt the
impact of historic levels of unemployment on the economy. The Trump
administration is examining proposals to provide cash incentives to
encourage unemployed Americans to return to work, a top economic
adviser said in an interview on Fox News.
Traders have also been optimistic that early signs of consumer
spending could become more permanent. Restaurant bookings and
spending on hotels and airlines appear to be picking up, helping to
further lift share prices in those industries.
"It's a dash for trash," said Ryan Detrick, senior market
strategist at LPL Financial. "[Investors are] selling the winners
and moving into those laggards. They're moving money around but not
blindly exiting...that's a healthy development."
The long-running rally in technology stocks has paused in recent
days, a sign that investors are now bargain hunting for less
expensive shares. New tensions between President Trump and Twitter
this week also contributed to the downbeat sentiment.
Twitter tumbled 2.8% after President Trump responded to the
social media company's decision Tuesday to apply a fact-checking
notice to one of his tweets. Mr. Trump tweeted Wednesday morning
that there will be "Big action to follow."
Meanwhile, Facebook fell 1.3% and Amazon tumbled 0.5%, extending
its losses for a fourth day -- the company's longest losing streak
since late February.
A late-session rally in stocks including Apple and Netflix
proved potent enough to power a gain for the Nasdaq Composite,
which traded lower for most of the session. The tech-heavy index
rose 72.14 points, or 0.8%, to finish at 9412.36. Wednesday marked
the sixth time since 2010 that the index was down more than 2% only
to finish higher.
Biotechnology companies were among the weaker performers,
despite promising signs for a coronavirus vaccine. Moderna, which
reported encouraging early results from its vaccine candidate last
week, lost 9.6%. Inovio Pharmaceuticals fell 8.8%.
Some traders have warned that the stock market remains fragile.
Though the S&P 500 is now only off 6% for the year, the economy
still remains dogged by steep unemployment and reduced consumer
spending.
The Federal Reserve said Wednesday in its "beige book," its
periodic and anecdotal report on economic conditions, that U.S.
businesses saw limited evidence of a recovery in recent weeks. The
report, which contains information through May 18, showed drops in
auto sales, home sales, manufacturing activity, among other
indicators. Travel-industry contacts in multiple areas reported
steep declines in hotel occupancy, in part, because of a plunge in
tourism and convention cancellations.
As a result, some traders and analysts remain unsure of how
quickly the economy can rebound, even when stay-at-home orders are
lifted.
"Just because we're allowed to re-open and allowed to go to
restaurants again and the bans are lifted, it doesn't necessarily
mean that we'll have an uptick in consumer spending and
consumption," said Nancy Davis, chief investment officer of
Quadratic Capital Management and portfolio manager of the IVOL
exchange-traded fund. "It's like an engine -- the car has
completely stalled and we don't know if we're going to be able to
go a block or a mile."
The yield on the benchmark 10-year U.S. Treasury ticked lower
Wednesday to 0.677%, from 0.697% the day before, signaling some
demand for safe assets. Yields fall when bond prices rise.
Meanwhile, July futures for West Texas Intermediate, the main
U.S. oil price, fell 4.5% to settle at $32.81 after the U.S. Energy
Information Administration reported an 8% week-over-week decline in
gasoline consumption and a 4% reduction for diesel during the week
that ended May 15.
Outside the U.S., the pan-continental Stoxx Europe 600 edged up
0.2% after the European Union set out a $2 trillion coronavirus
response plan. The proposal includes a EUR750 billion ($824
billion) recovery plan and EUR1.1 trillion budget over the next
seven years.
And in Asia, stocks were largely mixed. Japan's Nikkei 225
gained 0.7%. China's Shanghai Composite drifted 0.3% lower. And the
Hang Seng slipped 0.4% as the prospect of renewed unrest in Hong
Kong added to growth concerns.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com, Anna Isaac at
anna.isaac@wsj.com and Frances Yoon at frances.yoon@wsj.com
(END) Dow Jones Newswires
May 27, 2020 17:03 ET (21:03 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.