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U.S. stocks extended gains Tuesday on hopes the peak of the coronavirus pandemic surge may be near in some places in the U.S. and Europe.
The Dow Jones Industrial Average climbed 250 points, a day after soaring more than 1,600 points. The Standard & Poor’s 500 rose 1%, adding to gains after it posted its best day in nearly two weeks Monday. All 11 sectors in the broad index were higher, led by gains in energy, real estate and industrial shares.
Investors have been anxiously watching for signs that the rate of new infections may be hitting its peak, which would give some clarity about how long the upcoming recession will last and how deep it will be. Heading into Tuesday, the S&P 500 was still down more than 20% since its record set in February, but the losses have been slowing since Washington promised massive amounts of aid to prop up the economy.
China on Tuesday reported no new deaths from coronavirus over the past 24 hours. The number of new coronavirus cases was dropping in the European hot spots of Italy and Spain.
“We’ve seen some real improvements on virus cases potentially peaking,” says Eric Freedman, chief investment officer at U.S. Bank Wealth Management. “Markets are very focused on the disease and the spread of the virus. The next decision point for investors is the depth and duration of corporate profitability and consumer activity.”
Market sentiment improved to a potential peak in New York’s new case growth. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, pointed to fewer deaths and hospitalizations in New York City.
“The idea is this: The trajectory of this economic and financial crisis depends heavily on when the U.S. economy can start back up,” Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments, said in a note. “If case growth in New York has peaked, then case growth in the U.S. is about two weeks behind and we would likely have avoided an even-more-painful credit crisis.”
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To be sure, Goodwin said she remains hesitant to buy stocks during the market’s latest leg up since there are still risks on the horizon. First, it’s too early to say case growth has definitively peaked, she said, adding that an increase in case volume would threaten to reverse upbeat sentiment. Second, slowing case growth doesn’t resolve looming credit and health risks, she said.
“Uncertainty around ‘back to work’ policies and a lack of medical tools against the virus, should it return, mean we are not out of the woods yet,” Goodwin said.
Deaths in New York surged by 731 on Monday, the largest daily rise in fatalities since the outbreak began, Gov. Andrew Cuomo said Tuesday, but added that hospitalizations appeared to be “plateauing.”
There were nearly 370,000 confirmed cases of coronavirus in the U.S. and almost 11,000 deaths. Worldwide, there are 1.3 million cases early Tuesday, according to the Johns Hopkins University data dashboard.
“U.S. officials still expect a deadly week, and several experts reiterated that easing the social distancing measures prematurely could lead to secondary outbreaks both in Europe and the U.S.,” Ken Berman, strategist at investment advice platform Gorilla Trades, said in a note. “The fact that the numbers in New York are not rising at an exponential pace is a huge plus, with the European development also improving the U.S. outlook.”
Energy markets remained volatile as traders looked for signs that Saudi Arabia and Russia may back off their price war and cut back on some of their production. Demand for oil has plummeted due to the weakening economy, and any cutback in production would help prop up its price. A meeting between OPEC, Russia and other producers planned for Monday was pushed back to Thursday.
Benchmark U.S. crude added 82 cents to reach $26.90 per barrel. It fell $2.26, or 8%, to settle at $26.08 a barrel Monday after surging nearly $7 last week. It started the year above $60 per barrel. Brent crude, the international standard, rose 82 cents to $33.87 a barrel.
France’s CAC 40 stock index rose 1.3%, while Germany’s DAX jumped 2%. Britain’s FTSE 100 added 1.6%.
In Asia, Japan’s benchmark Nikkei 225 gained 2.0% to finish at 18,950.18 ahead of Prime Minister Shinzo Abe’s announcement of a state of emergency in Tokyo and six other regions. Hong Kong’s Hang Seng added 2.1%, while the Shanghai Composite jumped 2%.
Contributing: The Associated Press
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