The Dow staged the biggest turnaround in about two months on Thursday, as investors overlooked data that showed 2.9 million Americans lost jobs last week, bringing the total unemployed to about 36.5 million since COVID-19 pandemic began.
What are major indexes doing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.95% was about 377.37 points, or 1.6%, higher at around 23,625.34, helped by gains in American Express Co . /zigman2/quotes/203805826/composite AXP +1.32% and UnitedHealth Group Inc. /zigman2/quotes/210453738/composite UNH +0.84% . The blue-chip index shook off a roughly 460-point slide in the early part of the session to an intraday low at 22,789.62, with the close higher marking its biggest turnaround since March 19, according to Dow Jones Market Data.
Meanwhile, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.58% rose 32,50 points, or 1.2%, at 2,852.50, after touching an intraday low at 2,766.64, helped by a 2.6% rally in financials /zigman2/quotes/210599854/delayed XX:SP500.40 +1.21% and a 1.3% rally in consumer-discretionary /zigman2/quotes/210600228/delayed XX:SP500.25 +0.09% names helping to lead the charge higher. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.69% closed 0.9% higher, gaining 80.55 points, to end at 8,943.72.
On Wednesday, the Dow slumped 516.81 points, or 2.2%, to finish at 23,247.97, wile the S&P 500 gave up 50.12 points, or 1.8%, to close at 2,820. The Nasdaq Composite slumped 139.38 points, or 1.6%, ending at 8,863.17.
What’s driving the market?
A rebound in large financial stocks helped to turn stocks around in afternoon action, as investor skittishness abated with signs of recovering demand as some U.S. states reopen their economies,.
“Financials led the rally,” J.J. Kinahan, chief market strategist for TD Ameritrade told MarketWatch, adding the banks have been a battered sector as investors worry about the economy and the possibility of negative interest rates, which can undercut a bank’s business model.
The reversal for stocks came despite U.S. economic data showing weekly jobless claims rose by 2.98 million in the week ended May 9. The claims brought the total jobs lost during the coronavirus crisis total to nearly 36.5 million over the past two months, by far the biggest loss in U.S. history, sending the unemployment rate up to over 15%.
Analysts said stocks had been stalling on growing concerns that historic stimulus efforts by central banks and governments won’t be enough to ensure a rapid, or V-shaped, rebound from the economic hit resulting from business and travel shutdowns in an effort to contain the pandemic.
For weeks stock markets have remained buoyant even in the face of huge job losses and poor first quarter corporate earnings, preferring to look forward to a slowly recovering economy.
Despite all the questions about the post-COVID-19 pandemic landscape, Diane Jaffee, senior portfolio manager at TCW believes multiple signals show the economy has hit bottom, and is starting to grind higher, albeit from a depressed base. The energy sector has provided some tailwind so far in the second quarter, and investors might look to the early release of bank stress tests for some confirmation of the health of financials, Jaffee said in an interview.
However, Minneapolis Federal Reserve President Neel Kashkari said that a “V-shaped recovery is off the table.” Speaking during a virtual roundtable discussion on Thursday, Kashkari said the recovery would likely be long and drawn out. While there will be a bounce after the worst GDP contraction in the April-June quarter in history, the economy will be “nowhere near back” to where it was in December 2019, he said.
“Stock pickers are just wildly guessing. At this point, I want to listen more to health experts than investors,” Kashkari said.