By Anna Isaac, Caitlin McCabe and Frances Yoon 

The Dow Jones Industrial Average climbed Wednesday on optimism that economic activity is gathering steam and authorities may offer more stimulus to bolster the recovery.

The blue-chip index was up 547 points, or 2.2%, as of the 4 p.m. close of trading in New York setting it on track to close above the 25000 mark for the first time since early March. The index was powered by gains in American Express, Goldman Sachs and JPMorgan Chase, all of which climbed more than 5%.

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 for much of the coronavirus pandemic.

Optimism has been building in recent days 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.

Stocks were also buoyed by signs that consumers are beginning to venture out into communities and spend again. Restaurant bookings and spending on hotels and airlines appear to be picking up. The Conference Board's consumer confidence index also stabilized in May.

As investors rotated back into cyclical shares, the long-running rally in big tech stocks has paused. Netflix dropped early Wednesday before rising 1.2%, while Amazon fell 0.5%.

The S&P 500 was up 1.5% late Wednesday. The tech-heavy Nasdaq Composite index was up about 0.8%.

Netflix and Amazon, along with Apple, Google parent Alphabet, Facebook and Microsoft together account for almost 20% of the value of the S&P 500, giving them significant sway over the direction of the benchmark index.

All six stocks have posted big gains for the year, while the S&P is still off more than 7%, despite a furious rally since late March.

Biotechnology companies also declined Wednesday, despite promising signs for a coronavirus vaccine last week. Moderna, which reported encouraging early results from its vaccine candidate last week, lost 11%. Inovio Pharmaceuticals fell 9.6%.

The economic pain from the coronavirus pandemic has still been deep, with more than 38 million Americans seeking unemployment benefits since mid-March. It remains unclear how long it will take people to get back to work, or whether consumer behavior will fully return to pre-virus levels.

"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."

Later Wednesday, investors will be watching for the Federal Reserve's beige book report on economic conditions. Home builder Toll Brothers will also report earnings, giving investors another glimpse of the virus' impact on real estate.

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.

Among European stocks, car makers were some of the biggest gainers. French President Emmanuel Macron on Tuesday evening said his government planned to spend billions of euros to prop up the country's auto industry amid a collapse in car purchases caused by the coronavirus crisis. Renault rose over 17% in Paris, while Peugeot climbed 4.9%.

"It's the biggest automotive intervention in history," said Demian Flowers, head of automotive research at Commerzbank. But the impact on stocks could be short-lived, based on the experience of 2009, Mr. Flowers said. Incentive programs for consumers can be temporarily effective, bringing forward purchases rather than building sustained demand.

The yield on the benchmark 10-year U.S. Treasury fell to 0.668% from 0.697% Tuesday. Yields rise when bond prices fall.

Meanwhile, Brent crude, the global benchmark for oil, slipped 2.2% to $35.94. Russian government officials have signaled that the country may hold off on committing to any extended production cuts ahead of a June meeting among major oil exporters, strategists at ING wrote in a note to clients.

In Asia, Japan's Nikkei 225 gained 0.7%. China's Shanghai Composite drifted 0.3% lower. The Hang Seng slipped 0.4% as the prospect of renewed unrest in Hong Kong added to growth concerns.

Write to Anna Isaac at, Caitlin McCabe at and Frances Yoon at


(END) Dow Jones Newswires

May 27, 2020 16:19 ET (20:19 GMT)

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