U.S. stocks closed solidly higher Thursday, recovering a chunk of Wednesday’s ugly loss, ahead of a key update of the banking sector from the Federal Reserve.
Investors have been struggling to balance the reality of the rise in the daily rate of new coronavirus cases against a marginal improvement in economic data and a rollback of red tape by U.S. financial regulators.
How are the benchmarks performing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.58% advanced 299.66 points, 1.2%, to close at 25,745.60, in turbulent trading, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.31% closed 33.43 points, or 1.1%, higher at 3,083,76. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.92% was 107.84 points, or 1.1%, at 10,017.
What’s driving the market?
The stock market struggled to find its footing Thursday, after the biggest sell off in two weeks on Wednesday, but ultimately gained ground in the final half-hour of trade helped by financial sector stocks which have lagged in the rebound from the market lows seen in late March.
Combined with a late-session resurgence in technology names, ten of the S&P 500’s 11 sectors finished higher, with the exception of the utility sector, which closed down 1.2%.
Markets got a boost after the Federal Deposit Insurance Commission and Office of the Comptroller of the Currency said they are planning to loosen the restrictions imposed by the Volcker rule and allow banks to more easily make large investments into venture capital and similar funds. They will also be able avoid setting aside cash for derivatives trades between different affiliates of the same firm, potentially freeing up billions of dollars in capital for the industry, according to the Wall Street Journal.
Shares of major banks, including JPMorgan Chase & Co . /zigman2/quotes/205971034/composite JPM -2.53% , Citigroup /zigman2/quotes/207741460/composite C -1.82% Goldman Sachs /zigman2/quotes/209237603/composite GS -3.50% and Morgan Stanley /zigman2/quotes/209104354/composite MS -4.35% , all finished sharply higher after the reports. The regulator update came ahead of the results of the Federal Reserve’s annual “stress test” of the banking system is expected to be released after Thursday’s close.
The Federal Reserve earlier said banks entered the coronavirus crisis in a strong position, but analysts believe that the length of the pandemic could erode the balance sheets of some institutions as credit losses mount. The Fed will release the results of its bank stress tests later Thursday but has asked banks to refrain from disclosing the results publicly until after the market closes on June 29.
Investors spent much of the day parsing slowly improving economic data against news of surging numbers of COVID-19 cases in some U.S. states.
In the week ended June 20, Americans filed 1.48 million new jobless claims, fewer than in the previous week and continuing claims, a measure that tracks the overall pool of benefit recipients, declined by more than forecast to 19.5 million in the week ended June 13.
In the third and final reading of first-quarter U.S. gross domestic product, the official scorecard of the health of the U.S. economy, the government confirmed that the economy contracted at an annualized pace of 5%. And a report on orders for long-lasting, or durable, goods, showed they rose 15.8% in May.
On Wednesday stocks sold off sharply when the U.S. recorded a one-day total of 34,700 newly confirmed COVID-19 cases, the highest level since late April, the Associated Press reported, using data compiled by Johns Hopkins University.
And on Thursday Texas announced that it was freezing its plan to allow businesses to reopen as more than 20 million people in the U.S. may have been infected, according to the Centers for Disease Control and Prevention. Apple /zigman2/quotes/202934861/composite AAPL -1.01% also announced it was closing more stores after announcing the temporary closure of seven stores in Houston pon Wednesday.