By Caitlin Ostroff, Frances Yoon and Karen Langley 

Stocks rose Wednesday as social unrest across the U.S. showed signs of calming and investors bet economic activity will improve with the ebbing of coronavirus infections and additional government stimulus.

The S&P 500 advanced 1.4% as of the 4 p.m. close of trading in New York. The Dow Jones Industrial Average added about 527 points, or 2.1%. The technology-heavy Nasdaq Composite gained 0.8%, climbing to within 2% of February's all-time high.

"Investors are continuing to ignore the three P's -- pandemic, protests and politics -- and are instead focused on what increasingly is being interpreted as a quicker and better than expected recovery in the economy and the idea that that may portend a quicker recovery for earnings as well," said David Donabedian, chief investment officer of CIBC Private Wealth Management.

Many cities in the eastern U.S. remained largely quiet overnight, with the violent outbursts and skirmishes of recent days abating, though protesters defied curfews in some areas. Markets have continued to rally over the past week despite the social unrest in the U.S. as investors bet that the protests sparked by the killing of George Floyd wouldn't curtail business activity or have a sustained impact on the economy.

Stimulus measures from governments and central banks in recent weeks have also opened the floodgates on cheap money, which is making its way into financial markets and boosting asset prices, investors say. President Trump plans to meet with senior advisers as soon as this week to discuss policy options for the next coronavirus relief package as the administration prepares for negotiations with Congress, according to a senior administration official.

Investors are looking ahead to the U.S. jobs report Friday for insight into the state of the labor market. In a potential bright sign Wednesday, the ADP National Employment Report showed nonfarm private sector employment in the U.S. decreased by 2.76 million jobs in May, a smaller loss than economists expected.

Sectors that have been battered this year led the S&P 500 on Wednesday, with the energy, financial and industrial groups each gaining more than 3%. Shares of small-cap companies also rallied, as the Russell 2000 index climbed 2.7%.

"The fact that we're seeing broader participation right now is indicative of increasing risk appetite among investors and more confidence in the equity market rally," said Ed Campbell, portfolio manager at QMA.

Among individual stocks, shares of Lyft climbed 11% after the ride-hailing platform said demand had risen in recent weeks as people began venturing out following Covid-19 lockdowns. CrowdStrike Holdings shares rose 8.6% after the cybersecurity company raised its financial projections for the year.

The gradual easing of lockdown measures around the world has also failed to trigger a second wave of infections so far, fueling optimism in markets, said Patrick Spencer, managing director of U.S. investment firm Baird. Daily reported infections in the 10 most-affected countries have continued to decline, according to data compiled by Johns Hopkins University.

"There's little evidence of a resurgence in the virus, and that's really bolstered investor confidence," Mr. Spencer said. "If basically the fundamentals aren't as bad as the market discounts, then markets will always improve and the news is getting less bad."

Progress toward a vaccine has also boosted sentiment. On Tuesday, Anthony Fauci, a leading expert in the U.S. government's response to the coronavirus pandemic, expressed cautious optimism that several successful vaccine candidates would prove effective "within a reasonable period of time" to fight coronavirus.

Overseas, the Stoxx Europe 600 gained 2.5%. South Korea's Kospi Composite led gains in the Asia-Pacific region, adding 2.9% after the government proposed an extra budget worth $28.9 billion, the third this year, to ease the economic impact of the coronavirus pandemic.

Global equity markets are being fueled by an improvement in business sentiment, gradual reopenings, subsiding concerns about an oversupply of oil, and additional stimulus measures, according to Kerry Craig, global market strategist for J.P. Morgan Asset Management. However, the abundance of risks calls for a cautious approach to investing, he said.

"It's difficult to say what factors could impede the performance in equities, but we have tensions rising between the U.S. and China, a U.S. election coming up, and there is a politically charged environment in the U.S. right now, so there are enough risks out there," Mr. Craig said. "We'd rather be more balanced right now than rotate into cheaper parts of the market."

The yield on the 10-year U.S. Treasury note rose to 0.766%, from 0.679% Tuesday. Yields rise as bond prices fall.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com, Frances Yoon at frances.yoon@wsj.com and Karen Langley at karen.langley@wsj.com

(END) Dow Jones Newswires

June 03, 2020 16:18 ET (20:18 GMT)

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