By Joe Wallace, Paul Vigna and Joanne Chiu 

U.S. stocks rose and oil prices approached $20 a barrel Monday after government officials signaled that measures to contain the coronavirus pandemic are likely to remain in place for an extended time.

The Dow Jones Industrial Average rose 2.2%, or 485 points, to 22122, while the S&P 500 added 2.6%. Both indexes have rallied more than 15% since bottoming a week ago but remain down more than 20% from their February records as the pandemic has closed businesses, reduced air travel and pushed millions of people to work from home.

The White House on Sunday extended its social-distancing guidelines through the end of April. The move marks a shift in stance for President Trump, who had said that he hoped to ease some restrictions by Easter to limit the economic damage.

U.S. crude-oil futures hit their lowest level in more than 18 years, as analysts forecast that quarantine measures are leading to the biggest decline in oil demand in history. Prices dropped 6.6% to $20.09 a barrel Monday, a level last seen in February 2002.

What is becoming clear is the pandemic is going to force a "very deep recession," said Nariman Behravesh, chief economist at research firm IHS Markit. The firm expects second-quarter gross domestic product will contract 20% to 25%, and the third quarter will decline as well.

The market hasn't, however, digested how slow the recovery will be, he said. The lockdowns may not end until the summer, he said. Myriad industries will be ravaged. Restarting supply chains will be slow, and capital spending likely restrained. People are going to be hesitant to go out in large group settings and reluctant to spend, he added.

"We'll be on a lower trajectory for a long time," Mr. Behravesh said.

The end of the first quarter, on Tuesday, will also test many businesses' ability to pay bills. Traders, meanwhile, are bracing for fresh constraints on liquidity in some financial markets as investors take stock of portfolios and banks assess their balance sheets at the end of March.

U.S. crude-oil prices came under renewed pressure as the restrictions on business activity in most economies -- combined with the threat of elevated production levels from Saudi Arabia and Russia -- raised the prospect of a longer downturn in fuel markets.

Global oil demand is set to drop by 12 million barrels a day in the second quarter in the steepest decline on record, according to analysts at Bank of America. With production also set to pick up, the bank forecasts that both U.S. and global crude futures will fall below $20 a barrel in the coming months and the world may run out of storage space for oil.

The price of oil is the market other traders are watching today, said Art Cashin, the head of UBS' floor operations at the NYSE, in a morning note. Traders are guessing there may be a "major test" at the $17-$18 level, he said.

That level was the bottom of the late 2001-early 2002 trading range -- U.S. crude closed at $17.45 on Nov. 15, 2001.

Despite the moves in equities, though, stock prices don't yet reflect the level of disruption to business activity taking place in the U.S., said Sophie Huynh, a strategist at Société Générale.

U.S. air carriers including United Airlines Holdings, Delta Air Lines and American Airlines Group fell as the companies cut flight schedules and look for other ways to pare costs, including eliminating jobs and cutting pay.

Among other movers, Abbott Laboratories jumped 7.2% after the drugmaker said the U.S. Food and Drug Administration had approved an emergency-use coronavirus test. Johnson & Johnson rose 6% after the company said it had made progress on a vaccine to prevent Covid-19 and that the product could be ready in early 2021.

In Europe, the pan-continental Stoxx Europe 600 index rose 1.3%.

In Asia, Japan's Nikkei 225 index, which logged its best week in its history last week, pulled back 1.6%. Hong Kong's Hang Seng Index and the Shanghai Composite in mainland China also retreated.

In another sign of investor caution, the yield on the 10-year U.S. Treasury note, a security that is seen as a haven, fell to 0.629% from 0.744% Friday.

Markets have entered a new phase in their response to the pandemic, said James McCormick, a strategist at NatWest Markets. After governments and central banks took extraordinary steps to backstop livelihoods and the financial system in March, investors are now attempting to assess the economic impact of the worsening pandemic and the effectiveness with which these stimulus packages are deployed.

"In April, we're settling into understanding a bit more about the growth impact and looking hopefully for some signs of flattening of the infection and mortality curves," Mr. McCormick said.

Investors are awaiting a series of data releases this week that will start to reveal the economic strain exerted by the pandemic and measures to contain the spread of the virus. In the U.S., surveys of purchasing managers are expected to show a steep decline in manufacturing activity, while jobless claims are likely to rise again after last week's record surge.

Whatever damage may lie ahead for the economy, the unprecedented moves by the Federal Reserve and other central banks likely means the market's bottom is already in, said Thomas Kee, president of market-analysis firm Stock Traders Daily.

"The time to play defense is already past," he said. "When you have an unlimited buyer at the other end of the table that doesn't care about risk or valuation, you can't really fight that."

Write to Joe Wallace at, Paul Vigna at and Joanne Chiu at


(END) Dow Jones Newswires

March 30, 2020 15:11 ET (19:11 GMT)

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