U.S. stocks pulled back Friday following three straight days of gains, signaling lingering caution among investors on the outlook for the U.S. economy even as Congress passed a massive coronavirus relief package.
The Dow Jones Industrial Average slumped 915.39 points to close at 21,636.78, as the U.S. eclipsed China as the global leader in virus cases. The Standard & Poor’s 500 fell 3.4% to finish at 2,541.47.
Despite Friday’s losses, the Dow still notched its biggest weekly gain in more than 80 years. For the week, it jumped 12.8%, its largest weekly percentage gain since 1938. The S&P 500 rose 10.3%, its biggest such gain since March 2009.
To be sure, the market is still down more than 20% from a peak it reached a month ago. Professional traders say investors need to see a decline in numbers of new infections before markets can find a bottom.
Traders say the passage of a $2.2 trillion fiscal stimulus bill has helped drive the stock market’s double-digit percentage gains this week. Congress and the Federal Reserve have promised an astonishing amount of aid for the economy and markets, hoping to support them as the pandemic shuts down more businesses each day.
The House approved the $2.2 trillion coronavirus economic rescue package Friday, which was passed by the Senate late Wednesday. President Donald Trump signed the bill late Friday.
“Now that the fiscal policy is in place and the Treasury has done what they need to do, the attention will turn back to the health crisis,” Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers, said in a note. “Investors have to consider how problems due to lack of business activity will be resolved. That is the big, open-ended question that took this market down.”
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Despite strong rallies this week, analysts say further big drops are to be expected until there have been enough sustained gains in the market, and progress in fighting the pandemic, to ease investors’ fear of further declines.
The U.S. on Thursday surpassed China for the most confirmed cases of the virus. More confirmations are expected as the U.S. ramps up testing. The U.S. counted more than 92,000 cases of coronavirus on Friday, with at least 1,380 deaths, according to the Johns Hopkins University data dashboard. More than 566,000 people are known to have been infected globally, and roughly 25,000 have died.
Investors had appeared to shrug off miserable news on unemployment Thursday following a report that nearly 3.3 million Americans applied for unemployment benefits last week, shattering the prior record set in 1982, as layoffs sweep the country.
Wall Street is looking ahead to the March jobs report, due on April 3, for further signs on how the pandemic has affected the economy. The March report could still be too early to reflect the full effects of the coronavirus shutdown. The first post-shutdown jobs report for April will be released on May 8.
“Fiscal stimulus will be coming just in time to help millions of Americans weather the storm, but we’re not out of the woods yet,” Jason Reed, economist, assistant chair and teaching professor of finance at the University of Notre Dame’s Mendoza College of Business, said in a note. “The state of jobless claims and unemployed workers will certainly get worse before it gets better.”
Cruise operators Norwegian Cruise Line and Carnival led the decliners in the S&P 500 Friday. The industry has been among the hardest hit by the economic fallout from the coronavirus. The companies are down more than 70% so far this year.
The yield on the 10-year Treasury fell to 0.72% from 0.81% late Thursday. Lower yields reflect dimmer expectations for economic growth and greater demand for low-risk assets.
In other trading, the price of crude oil slid 4.8% to close at $21.51 a barrel. Goldman Sachs has forecast that it will fall well below $20 a barrel in the next two months because storage will be filled to the brim and wells will have to be shut in.
In Europe, stocks came under pressure after U.K. Prime Minister Boris Johnson tested positive for the coronavirus. Germany’s DAX fell 3.7% while the CAC 40 in Paris gave up 4.2%. Britain’s FTSE 100 sank 5.3%.
Asian markets mostly rose as governments tightened controls on businesses and travel, seeking to contain the pandemic. Japan’s Nikkei 225 index surged 3.9%. The Hang Seng in Hong Kong advanced 0.6%, while the Shanghai Composite index rose 0.3%.
Contributing: The Associated Press