U.S. stocks notched their first three-day rally in six weeks Thursday on hopes that Congress will quickly approve a coronavirus rescue package for the economy while the outbreak in China shows signs that it has been largely contained.
The Dow Jones Industrial Average climbed 1,351.62 points, or 6.4%, to close at 22,552.17. The blue-chip average has advanced 21.3% over the past three days, its biggest three-day gain since 1931. Those gains helped push the Dow back into bull market territory after ending its 11-year historic run this month.
The Standard & Poor’s 500 added 6.2% to finish at 2,630.07. It has gained 17.6% over the past three days, its best percentage gain since 1933.
The gains came even as data revealed a record number of Americans filed for unemployment benefits last week after a wave of layoffs from the coronavirus pandemic.
Initial claims for state unemployment benefits, a barometer for layoffs, surged to a seasonally adjusted 3.3 million last week, the Labor Department said Thursday. That marked the highest level of claims in history. Forecasters say a recession looks increasingly inevitable.
The data shouldn’t come as a surprise, analysts say, because investors anticipated a significant rise in jobless claims in the near term. Once there is a decline in the number of new infections from the virus, investors anticipate the markets can find a bottom.
"Record unemployment data is horrible news, but we knew it was going to be terrible," says Joe Conroy, founder of Maryland-based Harford Retirement Planners. "Most people agree that we’re in a recession. What's helped prop up the market are signs that China is starting to contain the virus."
The data offers investors clues into the duration and severity of the virus' effects on the U.S. economy. Global stock prices have swung wildly as business shutdowns spread around the world.
Confirmed coronavirus cases in America surpassed 80,000, leading to 1,136 deaths, and more confirmations are likely as the nation ramps up testing. The global death toll was more than 23,600, and total confirmed cases went past 523,000, according to the Johns Hopkins University data dashboard.
Stocks will probably trade in a narrow range until things get significantly better or worse, analysts say.
"Investors expect that the coming weeks will likely be the worst of it,” says Michael Sheldon, chief investment officer and executive director at investment adviser RDM Financial Group at Hightower. "This is likely to be short-term in nature. Once the economy opens up again, all of this data should start to recover. We just don't know how quickly or how robust the recovery will be."
The Senate approved aid late Wednesday to blunt the impact of business shutdowns due to the coronavirus. The measure goes to the House, which is likely to approve it.
“The stimulus package is needed as soon as possible because there are people out of work and there are industries that have been completely damaged,” says Michael Lackwood, founding principal of New York-based Spring Delta Asset Management. “Without any kind of assistance, those businesses will be crippled.”
Federal Reserve Chairman Jerome Powell pledged Thursday that the central bank will continue to provide capital to businesses to help combat the economic damage from the virus.
“When it comes to this lending, we’re not going to run out of ammunition, that doesn’t happen,” Powell told NBC. “We still have policy room in other dimensions to support the economy.”
Boeing continued to climb after soaring more than 24% Wednesday in part on expectations that it stands to gain from the congressional aid package. The aircraft manufacturer was the biggest gainer in the Dow Jones Industrial Average, rising nearly 14%.
The yield on the 10-year Treasury fell to 0.82% from 0.85% late Wednesday. It had been as low as 0.77% just before the jobless report was released. Lower yields reflect dimmer expectations for economic growth and greater demand for low-risk assets.
Benchmark U.S. oil slid 7.7% to settle at $22.60 a barrel. Goldman Sachs forecast that it will fall well below $20 a barrel in the next two months because storage will be filled to the brim and wells will have to be shut in.
In Europe, London’s FTSE 100 rose 2.2% and Frankfurt’s DAX rose 1.3%. The CAC 40 in France retreated 2.5%. In Asia, the Nikkei 225 in Tokyo declined 4.5% while Hong Kong’s Hang Seng shed 0.7%. The Shanghai Composite Index declined 0.6%.