U.S. stocks rebounded Wednesday, ending higher for the first time in three days, as investors gained confidence from stabilizing crude oil markets, some better-than-expected corporate earnings reports, and expectations for Congress to roll out another fiscal stimulus package.
How did benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.94% advanced 456.94 points, or 2%, to finish at 23,475.82. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.92% gained 62.75 points, or 2.3%, to end at 2,799.31. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.94% climbed 232.15 points, or 2.7%, to close at 8,495.38.
At Tuesday’s regular close, the Dow fell 631.56 points, or 2.7%, to end at 23,018, while the S&P 500 index lost 86.60 points, or 3.1%, to close at 2,736.56, with both benchmarks finishing at their lowest levels since April 7, according to FactSet data. The Nasdaq Composite Index retreated 297.50 points Tuesday, or 3.5%, to end at 8,263.23, marking its lowest close since April 13.
What drove the market?
Investors were focusing on bright spots Wednesday, including signs that battered oil prices might be finding a floor, even as U.S. corporate earnings reports were mixed with consumers reining in spending.
“It looks like we’ve seen oil prices coming back today, and rebounding a bit,” Allianz Investment Management’s Charlie Ripley told MarketWatch. “But over the past couple weeks, we’ve seen market sentiment improve. And a lot of that is around what we’ve seen in regards to the number of [COVID-19] cases and plans for re-opening up of the economy.”
Las Vegas mayor Carolyn Goodman has been in the spotlight after she called on Sin City’s casinos and hotels to reopen, despite the potential threat to workers and visitors during the pandemic. South Dakota, which resisted strict stay-at-home orders adopted by coastal states, could see 700 fans flock to two large auto races over the weekend, according to USA Today and CNN.
U.S. Treasury Secretary Steven Mnuchin said he was looking forward to having most of the U.S. economy open later in the summer.
Also Tuesday, Senators passed another coronavirus relief package worth nearly $500 billion to replenish funds for small businesses exhausted within days of applications opening, and the measure was expected to pass the House of Representatives Thursday, as President Donald Trump threw his support behind the measure.
But battle lines also were hardening over additional coronavirus aid from Washington on Wednesday, potentially pushing the next round of coronavirus relief off until June, as leading Senate Republicans urged restraint on further assistance to state and local governments.
Earlier this week, the unprecedented collapse below zero in the price of spot oil futures had been eroding the market’s bullish patina. But values for crude showed signs of stabilizing Wednesday, after the history-setting May contract expired and as West Texas Intermediate oil for June delivery recovered a portion of its losses, after settling Tuesday at the lowest level for a most-active contract since 1999.
“Any time we get a selloff like yesterday, you have to watch if the oil weakness was going to spill over into other sectors and assets,” said Quincy Krosby, chief market strategist at Prudential Financial.
She said the resilience in corporate bond markets to the oil shock indicated investors were capable of shaking off bad news. The sharp oil price drop has raised fears that a wave of bankruptcies would hit energy-related companies in the coming weeks and months.
Although oil companies represent a sliver, at about 2.6%, of the overall S&P 500 index, the slump in crude prices has cut into investor confidence that helped stocks recover from recent lows last month as the coronavirus pandemic swept across the U.S.