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Market Snapshot

April 9, 2020, 4:43 p.m. EDT

S&P 500 books best weekly gain in 45 years, but violent oil swings weigh on energy sector in week’s final session

Fed’s Powell sees high unemployment as temporary

By Mark DeCambre, MarketWatch , Andrea Riquier


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Powell in focus

U.S. stocks finished the holiday-shortened week sharply higher Thursday, with the main indexes recovering about half of their losses that were racked up in late March during the height of fears about the impact of COVID-19.

Investors appeared to shrug off another 6.6 million jobless claims, and a wild ride in the energy sector, to focus on the Federal Reserve’s announcement of new efforts to help fix parts of the financial market and economy debilitated by the coronavirus shutdowns.

U.S. exchanges on Friday will be closed in observance of Good Friday, and those in Europe will also be closed for Easter Monday.

How did indexes perform?

The Dow Jones Industrial Average (DOW:DJIA)  gained 285.80 points, or 1.2%, to close at 23,719.37, while the S&P 500 (S&P:SPX)  jumped 39.84 points or 1.5% to end at 2,789.82. The Nasdaq Composite (AMERICAN:COMP)  advanced 62.67 points to trade near 8,153.58, a 0.8% gain.

For the week, the Dow rose 12.67%, the S&P 500 notched a 12.1% gain for the abbreviated week, marking its best weekly gain since 1974, and the Nasdaq rose 10.59%, according to Dow Jones Market Data.

From its recent March 23 low, the Dow is up 25.01%, the S&P 500 is up 22.27% from that point and the Nasdaq is up 18.20%, according to FactSet data.

What’s driving the market?

Fed assistance trumped deepening job losses in the U.S. due to the coronavirus pandemic, helping bolster the buying mood on Wall Street in the final session of the abbreviated week.

Another 6.6 million Americans filed for unemployment in the week ending April 4, topping expectations for 6 million new filings, and claims from two weeks ago were raised, painting a stark picture of the economic toll taken by the coronavirus outbreak.

On Thursday, the Federal Reserve also announced details of its new Main Street Lending program and will provide $600 billion support for midsize businesses and $500 billion for states, counties and cities.

“Stocks are up because the damage to the economy — evident in claims — is beyond comprehension, while the response of the Fed is easier to understand,” said Chris Low, chief economist for FHN Financial.

In a webcast appearance, Fed Chairman Jerome Powell said the economy is strong enough to be “robust” once the cloud of the coronavirus pandemic is past. High unemployment can be temporary, he said.

Markets this week have been buttressed by signs of a slowdown in the number of hospitalizations and intensive-care admissions in New York and Europe, and the hope that the economy may soon be reopened.

The decline in the number of new infections has provided some hope to bulls that the worst of the disease may be over, but experts have advocated patience in dealing with the coronavirus that spread from China in January and has infected 1.5 million people and claimed more than 89,000 lives worldwide, according to data from Johns Hopkins University.

A number of analysts also have been skeptical of the recent bullishness in the market, suggesting that stocks have recovered too far too fast and seem likely to retest lows put in on March 23.

“There has to be a capitulation where everyone throws their hands in the air and sells it all, gets rid of the hopes and dreams they had for the stocks in their portfolio,” Kim Forrest, founder and chief investment officer at Bokeh Capital Management told MarketWatch.

Because the damage to the job market came so quickly, U.S. unemployment benefit systems have been overwhelmed. Some economists estimate the true number of people out of work could be as much as one-third higher . That makes the true jobless rate hard to reckon, but estimates range from 15% to 20%.

“I don’t believe looking to the past, looking at the economic data, has any relevance in this situation,” Forrest said. “We really don’t know how to restart an economy that’s been closed because of fear in the population.”

Investors were also watching a meeting of oil producers that is intended to stabilize oil prices and end a damaging price war for market share between major crude producers Russia and Saudi Arabia. Although a deal in principal between Riyadh and Moscow has been announced, investors fearing that those efforts won’t be enough to address a demand shock created by the viral outbreak dragged prices of crude from gains to a 9.3% loss, weighing on the energy sector.

The move lower “was very much related to crude everyone says they want to comprise but at the end of the day nobody wants to give too much up,” JJ Kinahan, chief market strategist at TD Ameritrade told MarketWatch.

In other U.S. data, the preliminary reading of the consumer-sentiment survey sank to 71 in early April from 89.1, marking the biggest-ever one-month decline and putting the index at lowest level since 2011, the University of Michigan said Thursday .

How did other markets trade?

In bond markets, the yield on the 10-year U.S. Treasury note (XTUP:BX:TMUBMUSD10Y)  retreated by 4 basis points to 0.722% from 0.762% late Wednesday. Bond prices rise as yields fall.

U.S. oil prices finished sharply lower in volatile trade amid a meeting of OPEC and a number of key producers, with a barrel of West Texas Intermediate crude for May delivery  giving up double-digit gains to settle 9.3% lower at $22.76 a barrel.

In precious metals, the price of an ounce of gold for June delivery  jumped to end at its highest finish since November 2012, adding $68.50, or 4.1%, to settle at $1,752.80 an ounce.

The U.S. dollar was 0.6% lower relative to a basket of trading peers, gauged by the ICE U.S. Dollar (IFUS:DXY) .

In Europe, the Stoxx Europe 600 (STOXX:XX:SXXP) closed 1.6% higher on Thursday, and the FTSE 100 (PAR:FR:FTSE) finished 2.9% higher.

In Asia overnight, stocks closed mostly higher. The China CSI 300 (CHINA:XX:000300) gained 0.3%, Hong Kong’s Hang Seng Index (HONG:HK:HSI)  advanced 1.4% and Japan’s Nikkei 225 (NIKKEI:JP:NIK)  finished virtually unchanged, off less than 0.1%.

Read: Individual investors have $1.5 trillion of cash on the sidelines, J.P. Morgan says. What next?

Which companies were in focus?

Canada Goose Holdings Inc. said it would rehire 900 workers to manufacture protective gear. The outerwear company’s shares jumped nearly 4% to finish Thursday trading but have lost more than half their value over the past year.

General Electric Co. shares rose even after the conglomerate said it expects its per-share earnings to be “materially below” guidance provided in early March, although free cash flow would likely be “near” its earlier guidance. Shares gained 2.2% on the day.

Shares of Hertz Global Holdings Inc. rose 5% after Deutsche Bank analysts cut their price target for the company by more than half, to $9 from $19. That would still represent significant upside for the car rental company’s stock price.

Cognizant Technology Solutions Corp. said it expects first-quarter earnings to be ahead of last year’s, but warned business will be slower in the second quarter. Shares rose 5.6%.

Carvana Co. (NYS:CVNA) shares ended 4.9% higher after a price target change, to $75 from $50, by Wells Fargo.

Shares of Walt Disney Co. (NYS:DIS) jumped 3.4% Thursday after the entertainment company reported more than 50 million subscribers to its Disney + streaming service.

See: How healthy aren’t-for-profit hospitals amid the coronavirus pandemic?

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